Payments to trust beneficiaries

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Trusts and Inheritance Tax

Guidance

This guidance note considers the trustees powers to make payments and whether the payment made is income or capital.

This guidance note is designed to give outline and background for accountants and tax advisers who deal with clients establishing trusts. It is not targeted at lawyers.

This guidance note deals with the position in England and Wales only. See Simon’s Taxes I5.8 for details of the provisions affecting Scotland and Northern Ireland.

Trustees’ power to make payments ― considerations

Payments by trustees to beneficiaries are made by exercise of their powers, the extent of which are determined by the trust deed. The trustees powers as to who can benefit from the income and capital, when and in what circumstances will be different.

The life tenant may have a right to income for life or another fixed period and the trustees may have overriding powers to appoint capital to other beneficiaries while the life interest subsists. In

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