We have a UK Resident Accumulation & Maintenance Trust created with a cash gift by a UK resident individual. The beneficiaries are minors and do not have any entitlement.
The trustees invested in 2 onshore bonds which they wish to encash and the tax treatment has to be ascertained. Research would suggest that:-
Provided that the settlor is alive and UK resident in the tax year in which the gains occur, then they will be assessed on the settlor as an individual. The calculation follows the normal rules for individuals with top slicing relief available where applicable. The settlor can reclaim the tax from the trustees; or
If the settlor died in the tax year prior to encashment then the trustees will become liable. No top slicing relief would be available.
The first scenario seems most odd, as it can be up to 20 years before a bond is encashed, whereas the cash gift only remains a PET for 7 years.
Comments would be most welcome.
TFO Tax LLP