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HMRC internal manual

Self Assessment Manual

Records: bankruptcy: bankruptcy: trustee’s record

A trustee in bankruptcy (or sequestration in Scotland) is assessable on

  • Interest arising on funds held by the trustee
  • Other income arising from the debtor’s estate, such as profits arising from the debtor’s business where it is continued by the trustee
  • Capital Gains arising from the trustee’s disposal of the debtor’s assets

The trustee is liable at the lower rate of tax on Bank and Building Society Interest plus any other income from savings and distributions within S1A ICTA 2007 he / she receives. All other income is taxable at the basic rate only. Tax on chargeable gains accruing on disposals of the property is computed by reference to the bankrupt’s or debtor’s circumstances.

An SA record type trust is opened in the debtor’s name (with the trustee being entered as a capacity) and, except for the final year, a trust return is required for years in which the trustee is in receipt of untaxed income or Capital Gains. When the trustee notifies liability

  • Use function SET UP TRUST to create an SA record in the name of the person against whom the bankruptcy order or award of sequestration was made. On using the function

    • Select ‘Non-discretionary’ as the trust type

    And, finally,

    • Select the [Add Trustee] button to access the function SET UP CAPACITY DETAILS
  • Use function SET UP CAPACITY DETAILS to enter details of the trustee in the capacity name and address fields. On using the function select from the drop down menu on the first part of the Capacity Role field

    • The appropriate capacity

    Or, if the appropriate capacity is not shown in the drop down menu

    • ’Other’ and then enter the capacity in the second part of the Capacity Role field abbreviating it, if necessary. For example, if there is a trustee in sequestration acting, enter ‘Permanent Trustee’