Trust record keeping for tax purposes

Records of a trust's income and expenses need to be kept to complete the Trust and Estate Tax Return and pass information to beneficiaries.

Records you must keep

There are several different types of trust and the sorts of records you’ll need to keep will vary.

In all cases you should keep the following documents:

  • bank statements for current and deposit accounts
  • confirmation of interest paid into bank or building society accounts
  • national savings bonds or certificates
  • certificates issued by life assurance companies
  • dividend vouchers from companies and unit trusts
  • stockbroker reports and record of dividends
  • details of expenses paid by the trustees
  • details of all taxes paid by the trust
  • if you’re the trustee of a discretionary trust, records of income payments to beneficiaries

Remember to keep details of any transactions made using online bank accounts - these may not send out paper statements.

If the trust sells or buys assets during the year, you’ll need:

  • completion statements for property transactions
  • contract notes for stocks or shares
  • receipts for sale or purchase expenses - including estate agents and solicitors charges on the sale of property and details of any Stamp Duty paid

If the trust owns property to let you’ll need the following information:

  • receipts for expenses connected with the property - including any mortgage interest
  • annual bills such as business or water rates
  • licence or rent agreements showing the rent payable

If the trust has received additional assets you’ll need to record:

  • the amount or value of the asset received - the market value on the date of transfer into the trust
  • the date the additional money or asset was received
  • details of who made the payment or who put the asset into trust

You should also keep records that show any important decisions made by the trustees, such as:

  • minutes of meetings
  • deeds of appointment
  • any decisions that affect the distribution of capital or income

All of this information will be useful when you complete the Trust and Estate Tax Return. It will also help you answer any questions about it that HMRC may have.

Records of income payments to beneficiaries

Trustees may make payments to people - known as beneficiaries - if either of the following applies to the beneficiaries:

  • they can receive income at the trustees’ discretion
  • they’re entitled to trust income under the terms of the trust

Trustees need to keep records of any income payments made at their discretion to beneficiaries. This information is required as part of the Trust and Estate Tax Return for discretionary trusts.

If you’re the trustee of a non settlor-interested trust and you’ve made a discretionary payment out of the income you’ll need to complete Question 14 on the Trust and Estate Tax Return. Different rules apply for trustees of settlor-interested trusts and Heritage Maintenance Funds, page 25 of the Trust and Estate Tax Return Guide gives details.

If the beneficiary is also the settlor and they - or their spouse or civil partner - have retained an interest in the trust, you can use form R185 (Settlor) instead.

Trustees may find it helpful to keep copies of all the forms R185 (Trust Income) that they give to beneficiaries.

How long to keep the records

You must keep your records for a minimum period as described below, in case HMRC checks your return. The same dates apply for paper or online returns.

If the trust has business income

If the trust has business income - for example it owns property to let - you must keep the business records for five more years after the normal filing deadline of 31 January.

For example, for a 2008-09 tax return submitted on or before 31 January 2010, you must keep the records until 31 January 2015.

If the trust doesn’t have business income

If you send in the tax return on or before 31 January, you should keep your records for one more year from 31 January.

For example, for a 2008-09 tax return filed on or before 31 January 2010, you must keep your records until 31 January 2011.

If you send the return back after 31 January

If you send the tax return back after 31 January because it was issued late or because you sent it back late, you should keep your records until the latest of the following dates:

  • 15 months after the date you sent the return in
  • 5 years after the normal 31 January filing deadline if they are business records

If HMRC starts a check

You may need to keep your records for longer than the dates above if a check has already been started. In this case you’ll need to keep your records until HMRC writes and tells you they’ve finished the check.

If your records are lost or destroyed

If the records you need to complete the Trust and Estate Tax Return have been lost or destroyed you should try to obtain the missing information in other ways. You can ask a bank to give you interest figures or bank statements, although they may charge for this.

Don’t delay sending in the return while you wait for this information. Use the information you’ve managed to get together to complete the return. Where it turns out you can’t replace the information you’ll need to estimate the missing figures. Just make sure you tell HMRC what’s happened and if any figures are:

  • an estimate - a figure you want HMRC to accept as your final figure
  • a provisional figure - one you want to use until you can confirm the actual amount, you must tell HMRC when you can do this

Use the ‘Additional Information’ section on the tax return to say how you’ve arrived at your figures and why you can’t use actual figures.

You can write to HMRC and give the correct figures within one year of the final date for filing the return. But if you make adjustments at a later date and you’ve underpaid tax there may be interest and penalties to pay.

You can find out more about using provisional figures on page 26 of the Trust and Estate Tax Return Guide.

Published 12 August 2012