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Capital or income?

17 July 2012
Issue: 4362 / Categories: Forum & Feedback , Capital Gains , Trusts
The ten-yearly charge for a discretionary trust is approaching in 2012. The main investment is a unit trust portfolio where accumulation units have reinvested the income arising

A discretionary trust will have its first ten-yearly charge in 2012. The main asset is a portfolio of unit trust accumulation units most of which have been reinvesting income into buying new units although some simply retain the income.

The total net income accumulated over the past ten years is about £80 000 and the current value of the portfolio is about £1.2m.

Do these accumulations still retain their ‘income’ nature if as is the case the trustees have not formally accumulated this income such that I can ignore the £80 000 when computing the ten-yearly charge?

No income distributions have been made to date and the tax pool is also large.

Please would readers also advise as to whether if units are sold to provide cash for distribution such distributions can be regarded as income in the hands of the recipient beneficiary.


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