Trusts & Estates Tax Services – Tailored Expertise for Trustees and Executors
At Spherical, we specialise in providing expert tax advice and compliance support for trusts and estates. As a boutique UK firm, we deliver top-tier expertise with a personal touch – helping trustees and executors navigate complex tax rules with confidence. Our team’s credentials, Chartered Tax Advisers ensure that our guidance is accurate, up-to-date, and fully compliant with UK tax legislation. We cover every aspect of trust and estate taxation, from setting up a trust to filing inheritance tax returns for an estate, all in a clear, approachable manner. Our goal is to protect your wealth and simplify your responsibilities, giving you peace of mind and letting you focus on what matters most.
We advise on creating and structuring trusts, handle ongoing obligations like trust tax returns (SA900) and HMRC Trust Registration (TRS), calculate and plan for 10-year anniversary charges and exit charges on trusts, and support executors with estate tax returns, including Inheritance Tax (IHT) filings and estate administration period taxes). We also assist with post-death tax planning, such as deeds of variation to optimise tax outcomes after a bereavement. Below, we outline how our team can help you in each of these areas.
Trust Creation and Structuring
Establishing a trust is a powerful way to manage and protect family wealth, but choosing the right trust structure and understanding the tax consequences is critical. We guide you through the creation of trusts from both a legal and tax perspective:
Choosing the Right Trust Type
UK law offers various trust types – for example, discretionary trusts, interest in possession (life interest) trusts, and bare (absolute) trusts – each with distinct advantages. We explain, in plain English, how these trusts work and help you select the structure that best fits your objectives. A discretionary trust provides flexibility to distribute assets among beneficiaries as circumstances change, whereas a life interest trust (interest in possession trust) guarantees income to one person, such as a surviving spouse while preserving capital for others, such as children or grandchildren. Our advice considers family dynamics, asset protection, and tax impact, ensuring the trust type aligns with your goals.
Tax Considerations at Setup
We plan carefully to manage any taxes when setting up the trust. Placing assets into most trusts is treated as a chargeable lifetime transfer for IHT purposes. If the value transferred into the trust exceeds your available nil-rate band, currently £325,000 per individual, a 20% entry charge to Inheritance Tax could arise at creation.
Additionally, transferring assets can trigger Capital Gains Tax (CGT) because it’s deemed a disposal – for instance, gifting an investment portfolio or property into trust might normally incur CGT on any increase in value. However, we help you claim reliefs like Hold-Over Relief (where available) to defer CGT, meaning the trust can receive the assets without an immediate CGT bill. Before any transfer, our advisers will calculate potential IHT and CGT, advise on how to minimise these, e.g. using any unused nil-rate band, splitting transfers over time, or having spouses each settle assets to use two allowances, and ensure all necessary HMRC filings, such as lifetime IHT returns, if needed, are handled correctly. This proactive planning allows you to set up the trust in a tax-efficient way from the start.
Legal Coordination
We collaborate with your solicitor to ensure the trust deed is drafted with optimal terms. While the lawyer focuses on legal validity and asset protection clauses, we advise on clauses that can impact taxation. For example, if you’re creating a discretionary trust, we might suggest including flexible powers that allow appointment of assets out of the trust within the first two years after death, if it’s a will trust to potentially read back for IHT purposes, or to convert to an interest in possession if laws change.
Our involvement at the drafting stage means the trust’s legal structure won’t inadvertently trigger unwanted tax outcomes, and it has the flexibility to adapt to future tax rule changes. By setting up the trust correctly and in line with HMRC guidance, you reduce the risk of surprises down the line.
Ongoing Trust Tax Compliance and Management
Once a trust is established, trustees must manage it responsibly, particularly when it comes to taxes and reporting. We provide full support for trust administration from a tax perspective, ensuring all HMRC requirements are met accurately and on time:
Trustees of relevant trusts are usually required to file annual trust tax returns (form SA900) to report income and capital gains. We take charge of preparing and submitting these returns for you. Our team will compile the trust’s income (interest, dividends, rent, etc.) and calculate any tax due according to the trust’s tax regime.
For example, discretionary trusts pay income tax at the highest rates on most income, while interest in possession trusts effectively pass the tax liability to the income beneficiary, the trustee may just need to report it. We ensure the right amounts are declared and taxed appropriately. We also handle Capital Gains Tax within the trust.
Nearly all UK trusts must be registered with HMRC’s Trust Registration Service (TRS). We guide trustees through this process, handling the online registration to provide HMRC with details of the trust’s settlor, trustees, beneficiaries, and assets. We also take care of ongoing maintenance on the TRS – if any trust details change (new trustee, address updates, trust terminates, etc.), we will update the register within the required deadline. Additionally, we help set up sound record-keeping for the trust’s transactions and tax history. We maintain financial statements for the trust, track distributions to beneficiaries, and keep supporting documents, such as share valuations or expense receipts.
If you (as trustees) distribute income or capital to beneficiaries, we advise on the best approach and handle the tax paperwork. For discretionary trusts, we help you understand the tax pool system – essentially, the trust pays tax on income, and when you pass that income to a beneficiary, the beneficiary gets a credit for the tax already paid. We prepare the necessary forms (R185 statements) for beneficiaries, showing the income and tax credit they must declare.
This way, a beneficiary can claim a refund if their personal tax rate is lower than the trust’s rate, ensuring no one pays extra tax unnecessarily. Our advice is always tailored to the specific circumstances that year. We also clarify how capital distributions work (e.g. appointing assets out of the trust) and any tax consequences, guiding you through any exit charge (explained below) and ensuring beneficiaries receive assets in a tax-efficient manner.
Trust Inheritance Tax
Every ten years, a relevant property trust must assess its value and pay up to 6% IHT on assets above the available nil-rate band. Calculating this 10-year charge is complex. It takes into account the value of trust assets, the trust’s history of additions or distributions, and the settlor’s other chargeable gifts in the seven years before the trust was set up. Our experts will perform this calculation well ahead of each ten-year anniversary. Thanks to reliefs and allowances, the effective rate often comes out lower than 6%.
For example, the trust benefits from at least one nil-rate band (potentially more if the settlor hadn’t used theirs fully elsewhere), and certain assets might qualify for Business Property Relief or Agricultural Property Relief, reducing their value for the charge. We ensure every available relief is factored in. Importantly, we also explore planning steps to reduce the charge.
When trustees distribute capital to a beneficiary or wind up the trust, an exit charge may apply if the trust is in the relevant property regime. An exit charge is essentially a pro-rated IHT charge for assets leaving the trust between ten-year anniversaries. The longer the time since the last anniversary (or since creation, if before the first one), the closer the exit charge rate gets to the full periodic rate.
We calculate any exit charge whenever you plan an asset distribution. Often, these charges are modest – for instance, if a distribution occurs soon after a ten-year charge was paid, the exit rate might be near 0%. Nonetheless, we ensure it’s correctly computed and reported on HMRC forms.
Managing these trust IHT charges can be daunting for trustees, but with Spherical, you gain seasoned experts who have handled numerous ten-year and exit charge computations. We keep an eye on the calendar for you, provide clear instructions, and often save our clients significant sums through careful planning. The result is that the trust’s value is preserved as much as possible for your beneficiaries, and you stay fully compliant with HMRC’s trust IHT rules.
Estate Tax Services – Inheritance Tax and Estate Administration
When someone passes away, their estate often needs to go through probate and settle any taxes due. We assist executors and personal representatives in all tax aspects of estate administration, ensuring a difficult time is not further burdened by tax complications. Our estate services include:
We help you determine if the estate owes Inheritance Tax, and if so, how much. This involves valuing the deceased’s assets (properties, bank accounts, investments, personal belongings, business interests, etc.) and liabilities (debts, funeral expenses, unpaid bills) to calculate the net estate. Our team prepares the required IHT return (Form IHT400), documenting asset values and applying all relevant tax-free allowances and reliefs.
For estates including family businesses or farms, we identify any assets eligible for Business Property Relief (BPR) or Agricultural Property Relief. Our thorough understanding of these reliefs means we won’t miss an opportunity to save IHT where the law permits. Once calculations are done, we will explain the estate’s IHT position clearly (often a relief to families who find the forms overwhelming) and submit the IHT400 to HMRC.
We will also guide you on paying any IHT (including options to pay in instalments over 10 years for certain assets like land or shares in a business, to ease cash flow). By handling the inheritance tax process end-to-end, we alleviate the pressure on executors and help avoid costly mistakes or penalties in HMRC’s review.
The duty of an executor isn’t over after addressing IHT. During the administration period (the time between death and final distribution of estate assets), the estate might earn income or realise capital gains – for example, interest on bank accounts, dividends on shares, or gains if an asset’s value rose before it was sold by the executor. The estate itself may need to pay income tax and CGT on these. We manage this “estate tax” compliance for you. HMRC treats an estate in administration in a similar way to a trust for tax purposes.
We also handle the deceased’s final personal tax return up to the date of death, making sure any tax refunds due (perhaps from overpaid PAYE on pensions or unused allowances) are claimed for the estate. Beyond compliance, we advise on post-death tax planning opportunities.
One common strategy is using a Deed of Variation (within two years of death) if beneficiaries agree to reallocate assets in a way that can save tax. We explain the implications and coordinate with solicitors to execute any such variations correctly. Our guidance ensures that the estate not only complies with tax law but also takes advantage of any last-minute planning to maximize what heirs receive, all within the framework of the deceased’s wishes.
Why Choose Spherical Tax Advisory for Trusts & Estates?
When it comes to trusts and estates, highly specialised knowledge and reliable service are paramount. Spherical offers both.
We take pride in our boutique approach – every client is important, and we tailor our services to your specific needs. If you are a trustee, we become an extension of your team, available to answer questions throughout the year, not just at tax time. If you are an executor, we guide you gently through what can be an unfamiliar process, keeping you informed and in control.
Confidentiality and integrity are at the core of our ethos. Discussing family trusts or a loved one’s estate is sensitive; you can count on our discretion and professionalism every step of the way.
By engaging specialists like Spherical, you reduce the risk of errors that could lead to HMRC penalties or excess tax payments. In many cases, the tax savings or efficient outcomes we achieve far outweigh our fees, meaning our service pays for itself. But beyond measurable savings, what we offer is peace of mind. As a trustee or executor, you carry a legal responsibility – we help you fulfil it with confidence.
Contact us today to learn more about our trusts and estates tax services or to schedule a meeting. We are here to provide clarity, save you tax, and ultimately give you the peace of mind that comes from knowing true professionals are handling your trusts and estates tax matters.