Thank you Simon for your help with this matter.
To summarise, I believe what you are suggesting is;
The Trustees have discretionary powers to pay income and accumulate under 31(2). This would suggest the beneficiary has no right to income (confirmed by the solicitor) and it would follow that the RAT to Trusts would therefore apply. However, you had stated TSEM1568, where HMRC states that ‘Where the beneficiary’s title to income is indefeasible, the income is the beneficiary’s as it arises, and we do not tax the trust as an accumulation/discretionary trust’. Presumably as the beneficiary has received all of the Trust income/had it all applied for his benefit, you are suggesting that HMRC would regard this as an indefeasible right?
I must admit I haven’t come across this before, but the definition of the word describes such a right as not subject to being lost, annulled or overturned. I cant see how this is the case; this isn’t a bare trust, the Trustees have discretion. Whilst they do distribute the income they have the power to change this at any time.
Claire Spinks
British Taxpayers