Taxation on unit trusts?

[RESSE]

If the maturity proceeds from an endowment that was written under trust (but matured in 2016) and has since been invested in unit trusts, what would the position be if there is an encashment and disbursement paid to an individual.

The unit trusts are held within the original trust from the endowment.

Would the tax charge fall on the unit trust holder, which is the trust and what would the tax charge be?

I am a bit perplexed and cannot find a clear answer from HMRC.

Thank you.

[Ginge R]

It'll depend. If it's a Bare Trust, Income Tax and Capital Gains Tax usually won't apply unless various settlor provisions apply. For a Discretionary Trust, income in excess of the standard tax rate band is taxed at the trust rates, but if you're the beneficiary named in an Interest-in-Possession trusts, income is taxed on you, so trust tax rates do not apply. Don't overlook the impact and effect of tax on the Trust itself. Bottom line is, there's not one simple answer, sorry. I'm mentally blowing dust off text books as I speak, so if I can help further, please feel free to drop me a line.

[Hyena]

Ginge R said:

It'll depend. If it's a Bare Trust, Income Tax and Capital Gains Tax usually won't apply unless various settlor provisions apply. For a Discretionary Trust, income in excess of the standard tax rate band is taxed at the trust rates, but if you're the beneficiary named in an Interest-in-Possession trusts, income is taxed on you, so trust tax rates do not apply. Don't overlook the impact and effect of tax on the Trust itself. Bottom line is, there's not one simple answer, sorry. I'm mentally blowing dust off text books as I speak, so if I can help further, please feel free to drop me a line.

What he said. Also bear in mind it depends on the size of the encashment, CGT allowances available etc.

[RESSE]

Thanks for the replies.

Edit to add (above was a quick reply) the unit trust monies were from an endowment subject to an Absolute Trust with one of the Trustees being the person looking to release monies from the new unit trusts.

Ginge R's reply was most helpful

Edited by RESSE on Wednesday 12th July 17:15

Edited by RESSE on Wednesday 12th July 17:15