The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Where trusts hold financial investments, they will produce income. The trustees must deal with that income in accordance with the directions in the trust deed. There may be a direction, or an option, to accumulate income, which means that income is not paid out to beneficiaries as it arises but it is saved up, reinvested and added to the capital of the trust fund for future use.
Settlors may include a direction to accumulate income for a specified period. Their motivation for doing so might be to increase the total value of the trust fund over time, although current income tax rates tend to mitigate against this aim. They may also choose accumulation to ensure that all of the trust fund is preserved until the beneficiaries reach a certain age or stage in their lives.
More commonly, a trust deed will include an option to accumulate giving the trustees the power to decide on an annual basis whether to accumulate some or all of the income or to distribute it. This shifts the responsibility to trustees to make judgments about the best use of the trust fund.
Alternatively, trustees may have neither the power nor the obligation to accumulate income but are instead directed to distribute the income as it arises. This is the situation with an interest in possession: the named beneficiary has a right to the income and consequently the trustees have no right to accumulate it. It is also possible for trustees to have discretion over how the income is distributed (ie no interest in possession) but no right to accumulate it. In other words, the trustees must distribute the income but they can decide how it is to be shared out.
The extent of the trustees’ power to accumulate income is to be found in the trust deed. The directions included therein may be augmented by certain standing statutory provisions as described below. The power to accumulate may be expressed in
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
The transactions in securities (TiS) legislation is anti-avoidance legislation aimed at situations where close company shareholders have engineered a disposal of shares to obtain a beneficial capital gains tax (CGT) rate, ie avoid income tax, on specified transactions.The targeted anti-avoidance
Introduction to the regimeThe aim of the patent box regime is to provide an incentive for companies to develop and retain patents and other qualifying intellectual property within the UK as part of the Government’s growth agenda. Finance Act 2012 originally introduced the legislation governing the
The majority of state benefits (also called social security benefits) are managed by the Department of Work and Pensions (DWP) via the Jobcentre Plus.Some benefits are dependent on a national insurance contribution record (and different classes of national insurance provide different benefit
Following Spring Budget 2020, statutory sick pay (SSP) rules were changed temporarily to help workers affected by the coronavirus (COVID-19) outbreak. The Chancellor confirmed the Prime Minister’s previous announcement that SSP will be paid from day 1 rather than day 4. Updated guidance on the
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.