Calculation of vulnerable beneficiary relief

Produced by a Tolley Trusts and Inheritance Tax expert

Trusts and Inheritance Tax

Guidance

Autumn Budget 2024

Calculation of vulnerable beneficiary relief

Produced by a Tolley Trusts and Inheritance Tax expert

Trusts and Inheritance Tax

Guidance

Autumn Budget 2024

This guidance note explains how income tax and capital gains tax relief for vulnerable beneficiary trusts is calculated and explains the effects of a claim in different circumstances. The qualifying conditions for the relief and procedure for making a claim for special tax treatment is described in the Vulnerable beneficiary trusts guidance note. The ‘special tax treatment’ is one claim for income tax and capital gains tax. You cannot choose to claim one without the other. However, the reliefs are calculated and declared on the tax return separately.

Calculation of income tax relief

The income tax concession for vulnerable beneficiary trusts is a tax reduction in the trustees’ income tax liability applied at Step 6 of the calculation of liability under ITA 2007, s 23. It is applied after any other reduction to which the trustees are entitled.

The aim of the relief is to bring the trustees’ tax liability down to what the vulnerable beneficiary’s tax liability would be on the trust income if it had arisen to him directly.

Essentially,

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Calculation of vulnerable beneficiary relief