The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
The category of ‘Trusts with vulnerable beneficiary’ was created by Finance Act 2005 to introduce special income tax and capital gains tax reliefs where property is held on trust for the benefit of a ‘vulnerable person’.
A vulnerable person is either:
The definition of a ‘disabled person’ includes someone who:
FA 2005, s 38
For the full definition and a list of the qualifying welfare benefits, see the Disabled and vulnerable beneficiary trusts – uniform definitions guidance note.
The intended effect of the available relief is to tax the trust as if the income or gains had arisen directly to the vulnerable beneficiary. The income and capital gains tax rates and allowances applicable to trusts are generally less favourable than those applied to individuals. The aim of the relief was to remove the disadvantage of higher tax liabilities where property is held in trust for the benefit of a person who cannot manage his financial affairs.
Whether the reliefs are useful or not depends on the type of trust and how the fund is used. In any situation where trust income is passed on
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