Tax Disputes & Investigations

Trusts/Charities

Trusts

HM Revenue & Customs' (HMRC) Trusts Office is part of its Charity Assets and Residence (CAR Trusts) Department.

CAR Trusts essentially deals with Income Tax and Capital Gains Tax issues surrounding UK resident trusts. In addition, it advises on and reviews settlements (and the settlements legislation), estates in administration and technical aspects concerning the joint ownership of assets.

CAR Trusts particularly reviews matters where assets are transferred into or out of trusts or where income is received or paid out by Trustees. In particular, CAR Trusts wants to establish who has received income from a trust and/or who is assessable on income arising to the Trustees (which is identifiable from relevant Trust pages (SA107) of a tax return). It should be remembered that: -

• where income arises to Trustees, but the settlor (i.e. the person who settled or transferred the property into the trust) still has an interest in the trust then the income is attributed to the settler and chargeable on him/her (Section 624 ITTOIA 2005) – the Trustees are chargeable to tax (because they received the income), but any tax paid by them is treated as paid on behalf of the settler; and
• where gains accrue to Trustees but the settlor still has an interest in the trust, the gains are again attributed to the settlor (Section 77 TCGA 1992) and are chargeable on him/her – again the Trustees are chargeable to tax (because they 'made' the gain), but any tax paid by them is treated as paid on behalf of the settler.

For the reasons set out above, CAR Trusts effectively leads any HMRC enquiries as it has responsibility for agreeing the amounts due with the Trustees (by way of an enquiry into the Trust and Estate return).

CAR Trusts' interest in the settlements legislation is primarily aimed at investigating and preventing higher rate taxpayers transferring income to members of their immediate family to take advantage of their unused personal allowances or basic rate bands. Arrangements we seen investigated include where a taxpayer claims to have given something away, but he/she has: -

• retained some type of interest in the property;
• given it to minor unmarried children; or
• arranged for the income from the property to go to the settlor.

Charities

HM Revenue & Customs' (HMRC) Charities Office is part of its Charity Assets and Residence (CAR) Department. The office deals with both direct and indirect tax issues faced by charities and charity controlled companies.

As charities normally apply their funds for charitable purposes, they are usually exempt from Income Tax, Capital Gains Tax and Corporation Tax. However, where tax is paid (including on Gift Aid donations) HMRC Charities handles and processes any repayments.

HMRC Charities Office has two audit groups and its specialist compliance teams are responsible for all HMRC enquiries into tax and VAT returns submitted by charities and/or controlled companies. In particular, the teams review returns where: -

• individuals or companies have made substantial gifts to charities (over £100,000) in a return period, involving cash (Gift Aid), shares/securities etc or real property;
• gifts of cash or assets have been made to a charity and it appears that the donor (or a connected person) may have received something valuable as a consequence of making the donation;
• the sums claimed under Gift Aid may not have actually been paid over to the charity;
• a charity or body controlled by a charity may have been used for the purpose of tax/VAT planning;
• there are concerns about a taxpayer's financial involvement with a charity or a body controlled by a charity;
• information held/obtained by HMRC suggests that charitable funds may have been misapplied or there are doubts about the honesty or integrity of somebody connected with a charity;
• it appears that a person may be able to control or manipulate a charity or has received any payments etc, including loans from the charity over £100,000; and
• a charity acquires shares in a company at a cost over £100,000.

How can OneE TDI help?

At the core of OneE TDI is a highly experienced team specialising in all areas of tax disputes and investigations work. We offer confidential, non-judgemental advice to best defend our clients and have a proven track record in successfully managing all contentious tax matters. We provide an outstanding, cost effective service, which results in tangible benefits and savings for our clients. Our advice saves our clients time and money and helps reduce their potential exposure to tax, interest and penalties.

We take control of and manage all parts of a CAR investigation so that our clients can get on with their life and their business. What price peace of mind?

Please see the Testimonials kindly provided by our clients (or their accountants or lawyers), which confirm our levels of client service.

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Whilst we endeavour to provide informative and accurate information, the content on this site is for general information purposes only and should not be taken to constitute tax or legal advice which must always be tailored to individual circumstances. Please contact us if you would like to discuss matters.

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