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Where Taxpayers and Advisers Meet

Demonstrating the existance of a bare trust

Jacob.Smythe
Posts:1
Joined:Thu Jun 07, 2018 11:10 am
Demonstrating the existance of a bare trust

Postby Jacob.Smythe » Thu Jun 07, 2018 11:54 am

Hi,

A relative set up a discretionary trust in the 1990s. Later on he bought two other properties for the beneficiaries. He didn't want them to be part of the discretionary trust, but since the beneficiaries were not all over 18, he could not buy them in their names. He bought one in the name of the trustees of the discretionary trust. The other which he bought a couple of years later was put in the name of the discretionary trust by accident. These two properties were always treated as if they belonged to the beneficiaries directly for accounting purposes; he asked his accountant to calculate the net income jointly for them at the end of the year and then distributed the total to the beneficiaries who paid the income tax. He was advised by his accountant that there was no need to correct the mistake in the name on the title deed.

One of the properties was transferred to the beneficiaries a short while after the youngest turned 18 and no CGT was paid. The other has not been transferred yet. My relative (the settlor) was surprised to discover this since he thought it had been done as well. This oversight is a factor of his age and chronic health issues.

From my understanding, due to his intentions and the way the properties were administered, they were in a bare trust. My concern is that the HMRC will argue against this since there was no formal trust document.

Has anyone come across a situation like this before? If it was disputed then what kinds of tax implications would the beneficiaries/trustees face?

Thank you so much for your time, attention and help.

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