Trust income type

29 January 2013

Issue: 4388 / Categories: Forum & Feedback , Trusts

A disabled person set up a discretionary trust with the proceeds of a medical negligence claim. There is a class of beneficiaries, but in practice payments are only made for the benefit of the disabled settlor

According to ITTOIA 2005 s 624 “income which arises under a settlement is treated as income of the settlor … if it arises … from property in which the settlor has an interest.” ITTOIA 2005 s 625 states that a settlor is treated as having such an interest if there are “any circumstances in which the property … is payable to the settlor”.

I am dealing with a discretionary trust which on the above analysis is settlor interested.

There is a class of beneficiaries but in practice the only payments made are for the benefit of the disabled settlor the funds having come from a medical negligence claim for injuries sustained by him.

I am trying to complete the 2012 trust tax return but am getting myself tied in knots trying to reconcile the legislation and the information contained in HMRC’s toolkit...

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