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HMRC internal manual

Trusts, Settlements and Estates Manual

Ownership and income tax: income tax claims - trusts

The taxpayer may claim that some sort of trust exists. It is up to the taxpayer to prove it. HMRC does not have to prove that a trust does not exist.

The taxpayer’s claim may be vague and general, or specific. The following describes what types of trust can exist.

Statutory trusts

Statutory trusts arise under statute - for example, under the rules of intestacy that apply in England and Wales - Administration of Estates Act 1925 (TSEM7826), or Section 42 of the Landlord and Tenant Act (LTA) 1987 - Flat Management Companies (TSEM5710).

You are more likely to encounter claims that non-statutory trusts exist - see below about express and implied trusts.

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Express trusts

The taxpayer may claim that an express trust exists. Express trusts are created intentionally by the act of the settlor. They are called express trusts because the settlor has expressed his or her wishes. You are likely to encounter such claims in the context of income tax. Guidance on express trusts is given in TSEM9500.

If there is an express trust there can be no implied trust.

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Implied trusts

If the taxpayer is not claiming an express trust - either written or oral – they may claim an implied trust exists. You are less likely to encounter such claims in the context of income tax.

Implied trusts are created by the operation of law. They are created by implication, and not by the express intention of the settlor.

There are two types of implied trusts:

  • resulting trusts
  • constructive trusts

Guidance on resulting trusts is given in TSEM9600. Guidance on constructive trusts is given in TSEM9700. While the scenarios in income tax claims are different from those in court cases about property, the principles developed in resulting and constructive trust cases can be useful in understanding the correct position.