Table Of ContentPreface
Many tax advisers seem to feel rather uncomfortable with the concept of trusts,
and the purpose of this book is to try to demystify the subject and explain the
tax rules and the way in which trusts can be used in practice as a flexible and
effective means of wealth accumulation and protection in an uncertain world.
A trust is not a separate legal entity, but a relationship which depends upon the
concept of Anglo-Saxon common law recognising a distinction between the
legal and beneficial ownership of a property. Common law has been developed
over the years and much statute law is now involved in the regulation and
taxation of trusts. It is assumed that, as this book is aimed at tax advisers, readers
will have the taxing statutes readily to hand. However, many tax advisers may
not have some of the non-tax legislation, which we feel is essential to consider
in effective trust planning, and the appendices therefore reproduce the major
trust legislation and extracts relating to trusts from a number of other relevant
Acts. We hope that practitioners will find this useful.
It is also assumed that readers will be familiar with the general tax rules
relating to the computation of income and gains for self-assessment purposes,
so this book concentrates on the UK tax rules applicable to trusts resident in
the UK or abroad, and the resultant tax liabilities of the trustees, settlors and
beneficiaries, and opportunities for reducing those liabilities where possible.
The law is stated as at 30 September 2019.
We would like to thank Sarah Styles for updating the manuscript with our
many alterations and our colleagues within our respective firms and chambers.
Nigel Eastaway OBE, Jacquelyn Kimber and Ian Richards
January 2020
Nigel Eastaway OBE
MHA MacIntyre Hudson
Email: nigel.eastaway@mhllp.co.uk
Jacquelyn Kimber
Newby Castleman LLP
Email: jmk@newbyc.co.uk
Ian Richards
Pump Court Tax Chambers
Email: irichards@pumptax.com
v
Table of Statutes
[References are to paragraph numbers and Appendices]
A B
Administration of Estates Act Bank of England and Financial
1925............................... 2.30, App 1 Services Act 2016 ............... 2.50
s 1(2) ....................................... 4.23 Bankruptcy Act 1914 ................ 2.43
7 ............................................ 1.50 s 42 ............................ 2.43, 2.44, 14.14
32 .......................................... 2.30 122 ........................................ 2.43
33 ............................ 1.27, 1.52, 2.18, Borders, Citizenship and
2.30, 4.45 Immi gration Act 2009 ....... 5.31
34 .......................................... 2.30 British Nationality Act 1981 ..... 5.31
(3) ..................................... 2.20
41 ..................................... 2.30, 2.31, C
App 7 Capital Allowances Act 2001 .... 17.16
42 .......................................... 2.30 s 15–17 .................................... 17.16
46 ..................................... 2.30, 2.33, 39 .......................................... 1.98
2.34, 13.18, 63(2) ..................................... 11.38
15.3 85, 129, 130, 177, 198 .......... 19.27
47 .............................. 1.27, 1.52, 2.4, Pt 3 (ss 271–360) .................... 17.15
2.30, 13.18 Pt 4 (ss 361–393) .................... 17.15
47A ....................................... s 382 ........................................ 19.27
2.30, 2.34 437–451 ................................ 1.108
48, 49 .................................... 2.30 Capital Gains Tax Act 1979
Sch 1 ........................................ 2.18 s 52(1) ..................................... 6.100
para 2 ................................... 2.30 54(1) ..................................... 6.100
Administration of Justice Act Charitable Trusts (Validation)
1982 Act 1954 .............................. 2.47
s 17 .......................................... 15.1 Charitable Uses Act 1601 .......... 2.45
Administration of Justice Act Charities Act 1993 ....... 2.21, 4.102, 11.2
1985 s 24, 25 .................................... 2.20
s7 ............................................ 2.25 Charities Act 2006 ................. 11.3, 11.4
9 ............................................ 2.20 s 1 ............................................ 2.45
Adoption Act 1976 (3) ....................................... 2.45
s 39(1), (5) ............................... 5.37 2(2) ....................................... 11.10
Air Departure Tax (Scotland) 15–18 .................................... 11.17
Act 2016 .............................. 1.85 Charities Act 2011 ........ 1.19, 2.45, 11.2,
Anti-avoidance of Devolved 11.14; App 1
Taxes (Wales) Act 2017 ..... 1.87 s 1 ............................................ 11.1
Anti-terrorism, Crime and 2 ................................ 11.1, 11.3, 11.4
Secu rity Act 2001 ............... (1)(b) ................................... 11.10
1.95, 2.51 3 ......................................... 11.1, 11.2
Apportionment Act 1870 .......... 4 ............................................ 11.1
2.21, App1 5 ............................................ 11.2
s 2 ............................................ 4.74 61–68 .................................... 11.17
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Table of Statutes
Charities Act 2011 – contd Company Directors Disquali-
s 104A, 104B .......................... 2.21 fication Act 1986 ................ 2.46
130–192 ................................ 2.46 Contracts (Rights of Third
Pt 10 (ss 193–203) .................. 11.76 Parties) Act 1999 ............... 1.57
Pt 11 (ss 204–250) .................. 11.78 Copyright, Designs and Patents
s 206–250 ................................ 11.78 Act 1988
267–272 ................................ 11.17 s 1(1), (2) ................................. 4.74
282–286, 288–292 ................ 4.102 91 .......................................... 1.35
Sch 7 Corporation Tax Act 2009 ........ 10.53
para 1 ................................... 2.45 s 2–4 ........................................ 7.11
Charities and Trustee Invest- 5 ....................................... 1.100, 7.11
ment (Scotland) Act 2005 ... 1.5 6–8 ........................................ 7.11
Charities (Protection and Social 13 ..................................... 5.78, 12.23
Investment) Act 2016 ......... 11.14, 14 ........................... 5.78, 5.80, 12.23
App 2 15 ............................ 5.78, 5.79, 5.80,
Children and Families Act 12.23
2014............................. 15.13; App 1 16, 17 .................................... 12.23
Civil Jurisdiction and Judg- 18 ............................ 5.79, 5.83, 5.84,
ments Act 1982 12.23
s 45 .......................................... 5.102 18 (1)–(4) .............................. 5.79
Civil Liability (Contributions) 41 .......................................... 5.85
Act 1978 .............................. 4.69 46 .......................................... 16.50
Civil Partnership Act 2004 53 ....................................... 16.4, 16.7
s 1 ............................................ App 7 54 ............................ 16.4, 16.7, 16.23
71 .......................................... 15.37 105–108 ......................... 11.35, 11.38
Sch 4 ........................................ 15.37 162–170 ................................ 5.85
Commissioners for Revenue Pt 4 (ss 202–291) .................... 17.50
and Customs Act 2005 s 289 ........................................ 5.85
s 18(1) ..................................... 1.130 452 ........................................ 6.161
Companies Act 1985 485(3) ................................... 16.84
s 130 ........................................ 4.75 Pt 8 (ss 711–906) .................... 17.50
208 ........................................ 1.7 s 782A ..................................... 1.101
425 ........................................ 4.75 965 ........................................ 15.27
Sch 8 967 ........................................ 15.28
para 15 ................................. 16.58 977 ........................................ 11.29
Companies Act 2006 Pt 10 Ch 8 (ss 979–981) .......... 10.70
s 197–214 ................................ 16.14 s 979 ........................................ 11.29
330(7) ................................... 16.14 1219 ...................................... 18.30
382 ........................................ 1.45 1290 ....................... 12.13, 16.7, 16.9,
394 ........................................ 16.58 16.10, 16.12, 16.13,
395, 396 ........................ 16.50, 16.58 16.15, 16.23, 16.24,
397–403 ................................ 16.58 16.25, 16.60
464 ........................................ 16.50 (2) ................................. 16.7
641–653 ............................ 4.90, 4.93 (2AA) ............................ 16.11
682(2)(b) ............................... 7.12 (3) ................................. 16.7
684–737 ................................ 4.90 1291 ....................... 16.7, 16.9, 16.10,
770, 772, 773 ........................ 3.16 16.12, 16.13,
Companies (Audit, Investigations 16.15, 16.19,
and Community Enterprise) 16.23, 16.24,
Act 2004 .............................. 11.79 16.25
xiv
Table of Statutes
Corporation Tax Act 2009 – contd Corporation Tax Act 2010 – contd
s 1292–1296 ............ 16.7, 16.9, 16.10, s 1076–1078 ............... 2.21, 4.74, 4.87,
16.11, 16.12, 16.13, 4.88
16.15, 16.23, 16.24, 1079, 1080 ......................... 4.87, 4.88
16.25, 16.60 1109 ...................................... 6.55
1297 ....................... 16.7, 16.9, 16.10, 1154–1157 ............................ 6.139
16.12, 16.13, 16.15, Corporation Tax (Northern
16.23, 16.24, 16.25, Ireland) Act 2015 ............... 1.86
16.60 Crime and Courts Act 2013 ...... 3.4
Sch 1 ........................................ 5.80 Criminal Finances Act 2017 ..... 1.95,
Sch 2 ........................................ 5.80 2.51
para 13 ................................. 5.78 Pt 1 (ss 1–34) ....................... 1.95, 2.51
para 14 ................................. 5.78 17 ....................................... 1.95, 2.51
para 15 ................................. 5.78 18 ....................................... 1.95, 2.51
(1) ............................ 5.80 (2)–(5) ............................ 1.95, 2.51
Sch 5 ........................................ 1.100 19 ....................................... 1.95, 2.51
Corporation Tax Act 2010 Pt 2 (ss 35–43) ..................... 1.95, 2.51
s 189, 190 ................................ 11.28 Pt 3 (ss 44–520 ..................... 1.95, 2.51
191–202 ......................... 11.28, 11.30 Pt 4 (ss 53–59) ..................... 1.95, 2.51
202A–202C .......................... 11.19 Sch 1 ..................................... 1.95, 2.51
203–217 ................................ 11.28 Criminal Law Act 1977
Pt 6A (ss 217A–217D) ............ 1.98 s 1–4 ........................................ 4.64
s 357GC–357GCZF ................ 1.98 5 ............................................ 4.64
438–449 ......................... 10.85, 16.63 (2) ....................................... 14.7
450, 451 ........................ 10.85, 10.96, Criminal Law (Consolidation)
10.102 (Scotland) Act 1995
452, 453 ......................... 10.85, 16.63 s 23A .................................... 1.95, 2.51
454 ............................... 10.85, 16.63, Criminal Procedure (Scotland)
16.98 Act 1995
455 ........................................ App 10 s 307 ..................................... 1.95, 2.51
455–459 ................................ 6.223
469 ........................................ 11.32 D
470 ........................................ 11.32 Data Protection Act 1998 .......... 1.144;
Pt 13 Ch 9 (ss 658–671) .......... 11.19 App 10
s 658–660, 660A, 660C, s 7 ......................................... 1.9, 1.144
660D, 660E, 661, 661A, Digital Economy Act 2017 ........ 1.96
661B, 662–671 ......... 11.19, 11.70 Domicile and Matrimonial Pro-
834–848 ................................ 17.27 ceedings Act 1973 ......... 2.26, 5.50,
849–862 ................................ 17.27 App 1
1000 ................................... 4.90, 6.55 Pt 1 (ss 1–35) .......................... 5.33
1001, 1002 ............................ 4.90 s 3 ............................................ 2.27
1003–1017 ........................ 4.90, 4.92 (1) ....................................... 5.45
1026–1028 ............................ 4.74 4 ............................... 2.27, 5.37, 5.48
1029–1034 ........................ 4.74, 4.90 17(5) ..................................... 2.27
1035–1043 ............... 4.74, 4.90, 4.91
1044 ......................... 4.74, 4.90, 4.91 E
1045–1048 ........................ 4.74, 4.90 Enduring Powers of Attorney
1049 .................................. 4.74, 4.81 Act 1985 ................. 2.18, 2.19, 2.39,
1050–1074 ............................ 4.74 2.41, App 1
1075 ......................... 4.74, 4.87, 4.88 s 1, 2 ........................................ 2.39
xv
Table of Statutes
Enduring Powers of Attorney Finance Act 1986
Act 1985 – contd s 101 ........................................ 9.33
s 3 ............................................ 2.39 102 .................... 6.202, 6.203, 6.211,
4, 5 ........................................ 2.39 6.294, 6.298, 6.299,
6–9 .................................... 2.19, 2.39 6.303, 12.22, 15.19
10–13 .................................... 2.39 (1), (2) ............................. 6.286
Sch 1 ........................................ 2.39 (3) ................ 6.286, 6.292, 6.293,
Sch 3 ........................................ 2.39 6.298
European Communities Act (4) ................ 6.286, 6.292, 6.293,
1972..................................... 1.99 6.303
European Union (Withdrawal) (5) ................................... 6.286
Act 2018 .............................. 1.99 (a) ....................... 6.296, 6.298
(d)–(i) ......................... 6.203
F (5A)–(5C) ....................... 6.209
Factors Act 1889 ........................ 1.47 (6)–(8) ............................. 6.286
Family Law Reform Act 1969 102A ................. 6.202, 6.213, 6.292,
s 1 ............................................ 3.53 6.294, 12.22
(1) ............................. 2.27, 3.1, 5.45 (2) ................................ 6.292
Family Law (Scotland) Act (3)–(5) .......................... 6.292
2006..................................... 5.36 (6) ................................ 6.293
s 22 .......................................... 2.27 102B ................. 6.202, 6.213, 6.292,
Finance Act 1894 6.293, 6.294, 12.22
s 5(2) ....................................... 8.26 (4) ................................. 6.203
Finance (1909–10) Act 102C ................. 6.202, 6.213, 6.292,
s 74 .......................................... 6.10 6.294, 12.22
Finance Act 1930 (6), (7) .......................... 6.294
s 40(2) ..................................... 12.60 103 .................... 6.203, 6.211, 6.295,
Finance Act 1936 6.318, 6.326
s 18 .......................................... 6.319 104 ........................................
Finance Act 1938 ....................... 6.200 6.203, 6.211
Finance Act 1944 Sch 19 ...................................... 9.33
s 33(3) ..................................... 6.319 Sch 20 ................... 6.202, 6.203, 6.211,
Finance Act 1975 12.22, 15.19
s 31–34 .................................... 12.60 para 2–4 ...............................
Sch 5 6.286, 6.289
para 1(3) ...................... 6.243, 6.298 5 ................................... 6.289
(8) .............................. 6.243 (5) .............................. 6.287
3(6) .............................. 6.243 6 ................................... 6.203
Finance Act 1978 (1)(a), (b) ...................
s 31 .................................. 6.319, 6.322 6.287, 6.298, 6.303
Finance Act 1982 (c) .......................... 6.298
s 108(1)(b) ............................... 6.243 7 ........................... 6.290, 6.298
129 ........................................ 11.20 8(1), (2) ....................... 6.291
Finance Act 1984 (3)–(5) ....................... 6.292
s 8A ......................................... 1.110 Finance (No 2) Act 1987
Finance Act 1985 s 96 .......................................... 8.27
s 82 ..................................... 6.10, 11.20 Finance Act 1989
83 .......................................... 6.10 s 42(11) ................................... 16.10
84 .......................................... 6.10 43 .......................... 16.7, 16.10, 16.24
95 .......................................... 12.50 (11)(a) ............................... 16.7
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Table of Statutes
Finance Act 1989 – contd Finance Act 2000 – contd
s 59 .......................................... 11.21 s 42 .......................................... 11.21
69(3AA) ................................ 16.79 90 .......................................... 6.112
75 .......................................... 18.8 91(3) ..................................... 6.181
151 ................................... 15.25, 19.1 92(5) ..................................... 10.94
(4) ................................... 6.66 112 ........................................ 6.13
178 ........................ 1.98, 10.18, 19.46 114 ........................................ 6.10
(2) ................................... 1.98 Finance Act 2002
Sch 6 s 51 .......................................... 10.107
para 1–17 ............................. 18.8 52 .......................................... 6.170
19–22 ........................... 18.8 84 .......................................... 6.123
23 ............................ 18.8, 18.13 119 ................................ 6.119, 6.188
24–30 ........................... 18.8 120 ........................................ 6.264
Finance Act 1990 134 .................................. 4.95, 14.24
s 25 .......................................... 11.21 Sch 11 ...................................... 10.107
(3A) .................................. 11.23 para 2 ................................... 10.107
Finance Act 1991 4 ................................... 10.108
s 53 .......................................... 6.323 5 ................................... 10.109
Finance (No 2) Act 1992 8 ................................... 10.107
s 27 .......................................... 11.21 Sch 18
Finance Act 1993 para 1–3 ........................ 11.70, 11.39
s 118 ........................................ 8.10 9 ................................... 11.39
Finance Act 1995 10–16 ........................... 11.71
s 113(2)(a) ............................... 6.169 Sch 29 ...................................... 6.123
145 ........................................ 6.28 Sch 39 ................................ 4.95, 14.24
Finance Act 1996 Finance Act 2003
s 154 ........................................ 7.16 s 42–47 .................................... 17.31
Finance Act 1997 48 .......................................... 17.31
s 30 .......................................... 18.53 (1)(a) ................................. 6.10
81 .......................................... 10.26 49 ........................... 6.10, 6.13, 11.20,
Finance Act 1998 17.31, 17.33
s 42 .......................................... 17.8 50 ................................... 17.31, 17.33
46(1), (2) ............................... 17.8 51, 52 .................................... 17.31
48 .......................................... 11.21 53 ................................... 17.31, 17.34
142 ........................................ 12.54 54 ................................... 17.31, 17.34
143 ........................................ 12.49 55 ................................... 17.31, 17.35
161(2)(c) ............................... 6.240 56 .................................. 17.36, 17.38
165 ........................................ 4.52 57 ................................... 17.31, 17.39
Sch 18 57A ....................................... 17.39
para 51 ................................. 12.54 58 .......................................... 17.31
Sch 25 ...................................... 12.54 58A, 58D .............................. 17.31
Finance Act 1999 59–61 .................................... 17.31
s 64 .......................................... 6.215 62 ................................... 17.31, 17.39
(5), (6) ............................... 6.216 63, 64 .................................... 17.31
104 ................................ 6.213, 6.292 64A ....................................... 6.13
112 ........................................ 6.10 65 ................................... 17.31, 17.39
Finance Act 2000 66, 67 .................................... 17.31
s 39 .......................................... 11.21 68 ................................... 17.31, 17.39
41 .......................................... 11.21 69–75 .................................... 17.31
(8) ..................................... 11.21 75A–75C .............................. 17.39
xvii
Table of Statutes
Finance Act 2003 – contd Finance Act 2004 – contd
s 76–92 ............................. 17.31, 17.39 s 164, 165 ................................ 18.92
93–99 .................................... 17.31 166 ........................................ 18.101
100–104 ......................... 17.31, 17.39 167, 168 ................................ 18.102
105 ....................... 6.11, 17.31, 17.39 169 ............................... 18.74, 18.121
106–124 ......................... 17.31, 17.39 170 ........................................ 18.74
143 ................................... 16.7, 16.10 171 ........................................ 18.101
185 ................................ 6.209, 6.296 172 ........................................ 18.101
Sch 3 ................................. 17.31, 17.33 173 ........................................ 18.101
para 1 ............................. 6.10, 11.20 174 ............................... 18.70, 18.100
3 ................................... 6.10 174A ..................................... 18.70
4 ................................... 15.30 175–185 ................................ 18.101
Sch 4 ........................................ 17.31 186, 187 ................................ 18.72
para 2 ................................... 17.33 188–195 ................................ 18.74
Sch 4ZA 196–201 ................................ 18.89
para 10I ............................... 6.12 202 ........................................ 18.90
12 ................................. 6.12 203 ............................. 18.102, 18.117
Sch 5 ..................... 17.31, 17.36, 17.38 204–213 ................................ 18.101
para 3 ................................... 17.38 208, 209 ................................ 1.151
Sch 6 ................................. 17.31, 17.39 214–217 .............. 18.82, 18.90, 18.94
Sch 6B ..................................... 17.39 218 .................... 18.82, 18.84, 18.90,
Sch 7 ................................. 17.31, 17.39 18.94
Sch 8 ................................. 17.31, 17.39 219 ..................... 18.82, 18.90, 18.94
Sch 9 ........................................ 17.31 220 ..................... 18.82, 18.83, 18.90,
Sch 10 ...................................... 17.31 18.94
Sch 11 ...................................... 17.31 221–226 ............ 18.82, 18.83, 18.90,
Sch 12 ...................................... 17.31 18.94
Sch 13 ...................................... 17.31 227 ........................................ 18.75
Sch 14 ...................................... 17.31 227ZA ................................... 1.98
Sch 15 .............................. 17.31, 17.39 227ZB ................................... 1.98
Sch 16 ..................... 6.11, 17.31, 17.39 227ZD ................................... 1.98
para 1, 2, 4–8 ....................... 17.40 228 ........................................ 18.75
Sch 17 ...................................... 17.31 228A ..................................... 18.73
Sch 18 ...................................... 17.31 229–238 ................................ 18.81
Sch 19 ...................................... 17.31 239–241 ................................ 18.101
Sch 20 ...................................... 17.31 242 ........................................ 18.72
Sch 23 ...................................... 16.13 242C–242E ........................... 1.97
Sch 24 ...................... 16.7, 16.7, 16.10, 243–244 ................................ 18.90
16.13, 16.20, 16.24, 245 ............................... 18.90, 18.117
16.28 246–249 ................................ 18.117
Finance Act 2004 ....................... 18.1 Pt 4 Ch 7 (ss 250–274) ............ 18.116
s 29 .......................................... 18.28 s 250–273 ................................ 18.116
66(1) ..................................... 1.125 273B ............................ 18.95, 18.116
84 .......................................... 6.201 274 ........................................ 18.116
116 ........................................ 15.19 Pt 4 Ch 8 (ss 275–284) ............ 18.116
Pt 4 (ss 149–284) ........... 18.71, 18.122 s 278 ........................................ 18.116
s 150–152 ................................ 18.71 306, 307 ............. 6.327, 6.328, 17.31
153 ................................ 1.151, 18.72 308 ..................... 6.327, 6.329, 17.31
154–156, 159 ........................ 18.72 309–313 ............. 6.327, 6.330, 17.31
160–163 ................................ 18.101 313C ..................................... 6.330
xviii