Discretionary Trusts and CAT

[galleryman]

How is CAT applied in general for a discretionary Trust?

If you are left a sizeable amount of money in a discretionary trust are you taxed on it all in one go OR do you as the beneficiary only pay tax on any income awarded by the trustee as you receive it?

Is it possible to be left money in a discretionary trust where you, the beneficiary, end up with a huge CAT bill but with no way to pay it should the trustees decide do not or for some reason are unable to liquidate the assets to cover the tax bill?

 

[Nige]

You aren't taxed on funds/assets in a discretionary trust until such time as the trustees actually pay out money/transfer assets to the beneficiaries.

However, the trust itself is subject to an annual tax on its assets unless at least one of the beneficiaries is aged 21 or unless the trust is exclusively for one or more incapacitated persons.

 

[galleryman]

Thanks Nige, as usual you are a font of knowledge.

one more question
If the trust was a bequest and if the benficiary is given an allowance from that trust is that allowance subject to CAT or income tax?

 

[stir crazy]

However, the trust itself is subject to an annual tax on its assets unless at least one of the beneficiaries is aged 21 or unless the trust is exclusively for one or more incapacitated persons.

what rate is it taxed at annually ?

 

[Nige]

what rate is it taxed at annually ?

There's a 6% once off charge and then a 1% charge on the total value of the assets (not just the income).

Galleryman, any payments from the trust are subject to CAT at 20% (subject to the relevant group threshold between the beneficiary and the person who established the trust).