Capital Gains in Discounted Gift Trust

[langtonbrow]

Are capital gains relevant when buying and selling funds within a discounted gift trust?
Is the trust taxation separate and distinct from the beneficiary that is receiving the income stream?
thanks fro any thoughts.

[maths]

Invariably discounted gift trusts are used as a way of reducing IHT on death.

Typically, the asset within the trust is an insurance bond albeit with certain rights thereunder being so-called "carved out".

I do not therefore understand your questions?

[langtonbrow]

Sorry if I wasn't clear, this isn't my specialist area. Yes there is a bond type product, albeit with fund allocation choices. Even if fund allocations are adjusted on a regular basis by "sales" and "purchases" (effectively reallocation) then the capital isn't actually realised, but is continually carved out via a monthly income stream. Is this what you are alluding to?

[AnthonyR]

If the buying and selling happens inside the bond then there is no taxable events (income or CGT) for the trust/beneficiaries until the bond is cashed in/surrendered. This then triggers a chargeable event, which is taxable as income (subject to top slicing relief) which may or may not result in a tax charge depending on the growth, the type of bond and the income tax position of the recipient.

The 'income stream' tends to be a 5% annual draw down which represents a repayment of capital and isn't taxable.

Within the bond itself there will be tax if it's a UK bond and usually gross roll up for offshore bonds. However, this is the responsibility of the bond provider to deal with.