HMRC Contacting Trusts Over Tax Return Errors

HM Revenue & Customs is contacting some trustees after identifying possible Trust Tax Return Errors relating to how trusts have been classified on recent Trust and Estate Tax Returns.

The campaign focuses on trusts where box 8.15 of the Trust and Estate Tax Return was ticked to show that the trust was not an accumulation or discretionary trust.

HMRC says information already held about some of these trusts suggests they may actually fall within the accumulation or discretionary trust category. If so, the trust may have paid Income Tax at the wrong rates.

Trustees who receive an HMRC letter should review the affected returns and respond by 2 November 2026.

Why Is HMRC Contacting Trusts?

HMRC has reviewed information held for certain trusts and identified cases where the trust’s reported classification may not match other information on its records.

The current HMRC trusts and estates campaign concerns returns where trustees ticked box 8.15.

Ticking this box indicates that the trust is not an accumulation or discretionary trust.

HMRC’s concern is that some trusts may have been incorrectly classified and should instead have paid Income Tax using the special trust rates.

Receiving a letter does not automatically mean the tax return is wrong.

HMRC is asking trustees to check the position and confirm whether the returns were completed correctly.

What Is Box 8.15 on a Trust and Estate Tax Return?

Box 8.15 on the Trust and Estate Tax Return relates to the type of trust being reported.

Whether this box should be ticked depends on the terms and operation of the trust.

Broadly, an accumulation or discretionary trust can include a trust where trustees have powers to:

• accumulate income;
• decide whether income should be paid to beneficiaries; or
• choose how much income individual beneficiaries receive.

The legal terms of the trust deed and the trustees’ powers are important when determining the correct classification.

Trustees should not rely on the trust’s name alone.

What Is an Accumulation or Discretionary Trust?

HMRC describes an accumulation or discretionary trust as one where trustees may have power to accumulate income or distribute income at their discretion.

This can include:

• accumulation trusts;
• discretionary trusts;
• some accumulation and maintenance trusts; and
• certain mixed trusts.

The distinction matters because these trusts can be subject to higher Income Tax rates than some other types of trust.

What Tax Rates Apply to Discretionary Trusts?

For accumulation and discretionary trusts, HMRC currently applies special Income Tax rates.

These are generally:

Other types of trusts can be taxed differently.

Some discretionary trusts can also fall within exceptions to the special trust rates, so trustees should check the trust’s precise circumstances before assuming additional tax is due.

What Should You Do If You Receive an HMRC Trust Letter?

Trustees receiving one of the current letters should review every relevant tax return where box 8.15 was ticked.

HMRC has asked trustees to respond by:

2 November 2026

There are two main outcomes.

If the Trust Tax Return Is Correct

If the trust has been classified correctly and the correct Income Tax rates have been applied, trustees should tell HMRC.

The contact details for responding are provided in the HMRC letter.

Trustees should keep supporting records showing why the trust’s classification is correct.

If the Trust Tax Return Is Wrong

If the review shows that the trust should have been treated as an accumulation or discretionary trust, the appropriate action depends on the tax year.

For 2024/25, HMRC says trustees should amend the return and pay any additional tax due.

For earlier years, HMRC says a voluntary disclosure may be required.

Interest may be payable on additional tax, and penalties may also apply depending on the circumstances.

How Do You Amend a Trust Tax Return?

If an error relates to the 2024/25 Trust and Estate Tax Return, HMRC’s campaign letter instructs trustees to amend the return.

Depending on how the original return was filed, this may involve:

• amending it through the Self Assessment service; or
• submitting a replacement paper return where appropriate.

Any additional tax identified should also be paid.

Before submitting an Amend Trust Tax Return correction, trustees should check the trust deed, previous tax computations and the basis on which the trust was originally classified.

This can help prevent replacing one incorrect return with another.

What If the Error Relates to Earlier Tax Years?

Earlier-year errors may need to be dealt with differently because the normal amendment window may have closed.

HMRC’s current campaign letter tells trustees to make a voluntary disclosure where special trust rates should have applied in an earlier year.

A disclosure may need to explain:

• which tax years are affected;
• what the original error was;
• why it occurred;
• the additional tax due;
• any applicable interest; and
• information relevant to any penalty calculation.

The correct disclosure method depends on the circumstances.

Where multiple years are involved, professional advice may be particularly useful before figures are submitted to HMRC.

Could HMRC Charge Interest or Penalties?

Potentially.

HMRC’s letter confirms that additional tax may attract interest, and a penalty may also be due depending on the circumstances.

Penalty treatment can depend on matters including:

• how the error arose;
• whether reasonable care was taken;
• when the error was identified;
• whether the disclosure was prompted or unprompted; and
• the level of cooperation with HMRC.

Trustees should therefore establish the facts before correcting a return rather than automatically assuming the same penalty treatment applies to every error.

Do Beneficiaries Need Updated Tax Information?

Possibly.

Where correcting a trust’s tax treatment changes income information previously provided to beneficiaries, HMRC says trustees should provide affected beneficiaries with an amended statement of income, such as an updated R185 where relevant.

This is important because changes at trust level can sometimes affect information used by beneficiaries in their own tax affairs.

Trustees should therefore consider both the trust’s return and any downstream reporting consequences.

Should You Check the Trust Registration Service?

Yes.

HMRC’s campaign specifically asks trustees to check that information held on the Trust Registration Service (TRS) remains correct.

This is particularly important where the trust’s terms or people involved with the trust have changed.

Trust information held on TRS can include details of:

• trustees;
• settlors;
• beneficiaries;
• potential beneficiaries;
• people who exercise control over the trust; and
• certain trust assets and tax information.

HMRC requires relevant trust information to be kept up to date.

What Beneficiary Changes Need to Be Updated?

Trustees should review whether the beneficiary information held on TRS still reflects the terms and operation of the trust.

HMRC requires information about beneficiaries and, in some cases, potential beneficiaries.

Depending on how the trust is structured, beneficiaries may be recorded individually or as a defined class.

Changes to who can benefit from the trust are particularly relevant to the current campaign because they can also help indicate whether the trust’s classification or operation has changed over time.

Families reviewing long-term wealth structures may also want to compare Family Investment Companies and trusts where control, beneficiaries and succession planning are important considerations.

What Happens If You Ignore the HMRC Letter?

Ignoring the letter can increase the risk of further HMRC action.

HMRC states that if trustees do not respond, it may open a compliance check into the trust’s tax position.

If additional tax is then found to be due, HMRC can charge interest and may also impose penalties.

Even where trustees believe the existing returns are correct, they should respond by the stated deadline rather than simply assuming no action is necessary.

How Should Trustees Review the Trust’s Tax Position?

A structured review should consider more than box 8.15 in isolation.

Trustees or their advisers should check:

1. the original trust deed;
2. any deeds of variation or appointment;
3. the trustees’ powers over income;
4. whether income can be accumulated;
5. whether trustees have discretion over distributions;
6. how the trust was classified on previous returns;
7. the Income Tax rates previously applied;
8. distributions made to beneficiaries;
9. beneficiary statements already issued; and
10. whether the Trust Registration Service is up to date.

This provides a stronger basis for deciding whether an HMRC Trust Tax Return needs correcting.

Where the trust holds or disposes of chargeable assets, trustees should also understand how Capital Gains Tax applies to trusts, as CGT obligations are separate from the Income Tax classification issues covered in this HMRC campaign.

CASE STUDY: Reviewing a Wimbledon Trust After an HMRC Tax Return Error Letter

Trustees of a family trust contacted our Wimbledon office after receiving an HMRC letter questioning how the trust had been classified on its recent Trust and Estate Tax Returns.

The returns had been completed with box 8.15 ticked, indicating that the trust was not treated as an accumulation or discretionary trust. However, HMRC’s records suggested that the trust deed may have given the trustees wider powers over how income could be accumulated or distributed.

CIGMA Accounting reviewed the trust deed, previous tax returns, income distributions and the trustees’ powers over beneficiaries. We also checked whether the Income Tax rates previously applied were consistent with the trust’s actual classification.

The review identified that the trust should have been treated as an accumulation or discretionary trust for one of the affected years. We then helped the trustees understand the difference between amending the 2024/25 return and dealing with earlier years through the appropriate voluntary disclosure process.

The review also covered whether updated beneficiary information would be needed, whether amended R185 statements might be required and whether the Trust Registration Service information remained accurate.

By reviewing the position before HMRC’s 2 November 2026 response deadline, the trustees were able to address the classification issue in a structured way rather than waiting for a formal compliance check.

The client left with a clearer understanding of their position, options, and next steps.