If it’s a disabled person’s interest the income has to be applied for the disabled person’s benefit during his lifetime (section 89(1)(b), Inheritance Tax Act 1984 and section 89A(2), Inheritance Tax Act 1984). However, for trusts established on or after 8 April 2013, there is express provision in the legislation for benefits (paid either from capital or income or a combination of the two) of the lower of £3,000 or 3% of the maximum value of the trust fund in any tax year to be paid to non-vulnerable beneficiaries without breaching the restrictions on capital and income.
Mary Ambrose
Thomson Reuters (Practical Law)