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Trusts with vulnerable beneficiaries—amount of income tax relief

Special income tax treatment can be claimed by trustees where property is held on qualifying trusts (see I5.1036) for the benefit of a vulnerable person (see I5.1035), and a vulnerable person election (see I5.1039) is in place¹.

Where trustees of a trust with a vulnerable beneficiary make a claim for special tax treatment, the claim covers both income tax and CGT for the tax year². It cannot apply to one tax and not the other except³ in a year in which the settlor is treated⁴ as having an interest in the trust property concerned⁵. However, where the settlor would usually be taxed on the amount of a payment to his minor unmarried child⁶, if the child is a vulnerable person the relief applies and the payment is not treated as the settlor's income⁷ (see I5.1039).

Although the liability for income tax remains the trustees', it is calculated according to the personal circumstances of the vulnerable