End of Accumulation period - income tax

Trusts Discussion
1

Afternoon

I have a settlement with an accumulation period of 21 years and we are now at the end of that period.

The terms of the trust state that the trustees shall “receive the income and apply the same as they shall in their absolute discretion determine for the maintenance of my said daughter”.

The next clause then gives the trustees the power to use the trust capital at their discretion for the maintenance of the daughter.

The daughter is not a disabled person.

The power of the trustees to accumulate income and convert it to capital will come to an end and the trustees will have to distribute the income to the daughter within a reasonable time. As this is the case, going forward will the trustees still have to pay income tax at the trust rate with the beneficiary reclaiming as appropriate, or should the income be paid gross with the beneficiary dealing with the tax direct?

Many thanks

2

45% applies but the trustees could grant her a revocable entitlement to the income. This will not be a RPT IHT chargeable event (nor will its revocation or her death) because post 2006 the assets remain RPT property and so outside her IHT estate. There is no CGT disposal as the trust property remains settled property.

Jack Harper