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Where Taxpayers and Advisers Meet

end of accumulation period

strawn
Posts:72
Joined:Fri Jun 01, 2012 10:11 am
end of accumulation period

Postby strawn » Thu Dec 23, 2021 12:25 am

A discretionary will trust has reached the end of its accumulation period. It is invested substantially in cash (mostly on loan to a beneficiary) and ns&i index-linked savings certificates. The trustees would like to retain the ILSCs for a few years. Can they argue that "money is fungible" and therefore mimic a distribution of the annual ILSC income by actually distributing instead an equal amount of the cash?

maths
Posts:8430
Joined:Wed Aug 06, 2008 3:25 pm

Re: end of accumulation period

Postby maths » Thu Dec 23, 2021 4:33 pm

Ignoring possible extension of the accumulation period (which requires a minor beneficiary to exists at the end of the acc period) then all trust income arising after the end of the acc period each year must be distributed. The cash is not income arising ;post the acc period, fungible or not.

strawn
Posts:72
Joined:Fri Jun 01, 2012 10:11 am

Re: end of accumulation period

Postby strawn » Thu Dec 23, 2021 11:40 pm

Ignoring possible extension of the accumulation period (which requires a minor beneficiary to exists at the end of the acc period) then all trust income arising after the end of the acc period each year must be distributed. The cash is not income arising ;post the acc period, fungible or not.
Thank you, maths. How might we distribute income from ILSCs? ns&i wrap it up into the value of the certificate annually.
Must we cash in the certificates to release that income?

Can you tell me any more about extending an accumulation period?
We do have a minor beneficiary born before the end of the accumulation period.

strawn
Posts:72
Joined:Fri Jun 01, 2012 10:11 am

Re: end of accumulation period

Postby strawn » Sat Jan 01, 2022 4:21 pm

A particular continuation: consider an ILSC with capitalised value £10,000. Suppose the trust holds it for five years whereupon ns&i announces it has become worth £13,000. If the trustees were to renew the certificate for its original capital value of £10,000 and instruct ns&i to send the income of £3,000 to the trust's bank account, presumably the trustees could then distribute the £3,000 to beneficiaries as income. Is that what you imply, maths?

Could there be any objection, by HMRC or anyone else, to the five year period in which that income has been built up before it is distributed?

Any views welcomed. I'd like some material to reflect on before I pay for expert advice.


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