Closely Held Trusts

A “closely held trust” is a discretionary trust or a trust where 20 or fewer individuals have between them, directly or indirectly, and for their own benefit, fixed entitlements to 75% or more of the income or capital of the trust.

Family trusts and trusts that are interposed entities are now classified as closely held trusts (from the 2019-20 tax year) for the purposes of applying a set of complex integrity rules.

The effect of the change is that the trustee of a closely held trust may be liable to pay trustee beneficiary non-disclosure tax (TBNT) in relation to a “circular trust distribution”. This is where a share of the net income of a trust is included in the assessable income of a trustee beneficiary. The trustee of the closely held trust becomes presently entitled to an amount, that is reasonably attributable to the whole or a part of the untaxed part of that share and TBNT has not previously been payable in respect of that share, and that pattern continues through a chain of trusts. This is not a common arrangement.

Get in touch with avance to find out about all the tax changes in 2019-20 that might affect your business.

Some of the Avance Chartered Accountants personnel involved in preparing this webpage may be members of a professional scheme approved under Professional Standards Legislation such that their occupational liability is limited under that Legislation. To the extent that applies, the following disclaimer applies to them. If you have any questions about the applicability of Professional Standards Legislation to Avance's personnel involved in preparing this webpage, please contact our office Liability limited by a scheme approved under Professional Standards.