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Bare trusts ― income tax and CGT

Produced by a
Trusts and Inheritance Tax
Guidance

Bare trusts ― income tax and CGT

Produced by a
Trusts and Inheritance Tax
Guidance
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This guidance note explains how trustees of bare trusts are treated for income tax and capital gains purposes. Although a bare trust is, in equity, a type of trust, for both income tax and capital gains tax purposes its existence is transparent. This means that no tax liability falls on the trustees in respect of their income and chargeable gains. Rather, the two tax regimes target and tax the beneficiary of such a trust at the beneficiary’s rates of tax.

Income tax

Although the income tax regime provides that bare trusts are not subject to the rules that apply to other types of trust, it does not explicitly say how to treat the income arising from property held in a bare trust. The following rules are established by case law:

  1. •

    any income arising to a bare trustee is assessable on the beneficiary as he is absolutely entitled to that income

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