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HMRC internal manual

Trusts, Settlements and Estates Manual

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HM Revenue & Customs
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Enquiry work: trusts - clearance on trust winding up

Background

If a trust is wound up and HMRC needs to send a Trust and Estate Tax Return to the trustees, covering the period to the cessation, we will usually do this after the end of the tax year in which the cessation occurred. Under Self-Assessment, however, HMRC can enquire into a tax return within a specified time

For returns that relate to the tax year 2007-08 or a later tax year the time allowed is up to 12 months after the day on which the return was delivered. This could mean that if a trust was wound up, say, on 10 April 2012 the trustees could not be sure, until 12 months after they filed their return, whether HMRC were going to enquire into the return for the period to cessation. In this example the return could be filed at any time from 11 April 2012 to 31 January 2014, so the trustees would not be sure of their position until a date between 11 April 2013 and 31 January 2015.

Procedure - return

To help trustees settle the tax affairs of the trust quickly HMRC will, if requested, issue a Trust and Estate Tax Return before the end of the tax year in which cessation occurred.

This practice is not statutory, but was included in the Budget announcement for Finance Act 2007.

Procedure - clearance

Whether the Trust and Estate Tax Return is issued before or after the end of that tax year, HMRC will, if requested, give early written confirmation if we do not intend to enquire into that return.

This confirmation does not preclude, in exceptional circumstances, HMRC enquiring into the tax return at a later date if we discover that the return was incomplete or incorrect. But in the vast majority of cases, receipt of this written confirmation will signify the end of HMRCs interest in the income and capital gains tax affairs of the trust and, where that is the only open matter, will enable the trustees to finalise tax liabilities and distribute trust property.

This practice is not statutory, but was included in the Budget announcement for Finance Act 2007.

Action

If a trust has been wound up and the trustees request a Trust and Estate Tax Return before the end of the tax year, issue an in-year Trust and Estate Tax Return.

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If the trustees request clearance we should acknowledge their request. If we do not intend to open an enquiry we should issue a letter confirming this. If we need time to carry out research we should keep the trustees informed.

This does not prevent us using the discovery provisions if it later turns out that the return is incorrect or incomplete.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)