TSEM2140 - 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 send a Notice to File a return, 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.

The time allowed is up to 12 months after the day on which the return was delivered provided, the return is received on or before the statutory filing date. This could mean that if a trust was wound up, say, on 10 April 2023 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 2023 to 31 January 2025, so the trustees would not be sure of their position until a date between 11 April 2023 and 31 January 2026.

Procedure - return

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

This practice is not statutory. 

Procedure - clearance

Whether the Trust and Estate Tax Return is delivered to HMRC before or after the end of that tax year, HMRC will, if requested, give early written confirmation that 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 most 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.