Produced by Tolley
  • 22 Dec 2021 18:41

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Disabled and vulnerable beneficiary trusts ― uniform definitions
  • Introduction
  • Special trust provisions for disabled persons and vulnerable beneficiaries
  • Definition of vulnerable beneficiary
  • Definition of a disabled person
  • Qualifying terms of the trust
  • Restrictions on use of the trust fund

Disabled and vulnerable beneficiary trusts ― uniform definitions

Introduction

It has long been recognised that special concessions are appropriate where property is held in trust for the benefit of a person who is unable to manage his financial affairs. Broadly, these concessions aim to treat the trust property as if it was owned outright by the individual, instead of applying special trust tax rules to it.

Concessions have been introduced piecemeal with the result that the qualifying definitions and conditions were not consistent and at times contradictory.

The Finance Act 2013 (and, for Scotland, the Social Security (Scotland) Act 2018) introduced amendments across the board to the tax legislation dealing with trusts for disabled persons and other vulnerable beneficiaries.

In summary, the amendments:

  1. updated the definition of a disabled person and applied it to all the relevant provisions

  2. harmonised the qualifying conditions for all such trusts

Special trust provisions for disabled persons and vulnerable beneficiaries

The provisions which are affected by these definitions are:

Inheritance tax

  1. trusts for bereaved minors ― see the Trusts for bereaved minors guidance note

  2. age 18–25 trusts ― see the Age 18–25 trusts guidance note

  3. the four types of disabled person’s trust ― see the Disabled person’s interest guidance note

Capital gains tax

  1. hold-over relief available to settlor-interested disabled person’s trust ― see the Hold-over relief guidance note

  2. trust for a disabled person entitled to the full annual exemption ― see the Basic principles of CGT for trusts guidance note

  3. special CGT treatment for vulnerable beneficiary trusts ― see the Vulnerable beneficiary trusts

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