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Where Taxpayers and Advisers Meet

Discounted Gift Trust, Income Tax

langtonbrow
Posts: 38
Joined: Tue Mar 10, 2009 1:52 pm

Discounted Gift Trust, Income Tax

Postby langtonbrow » Sat Jul 18, 2020 12:04 pm

My mother has a discretionary discounted gift trust which pays a regular monthly income set at around 4% of the original investment. The carve out is paid to my mother and, from her, gifted to a non tax payer as education expenses.
The trust appears to be accruing a tax pool as part of its operation which is automatically deducted from the trust annually.
Does my mother need to pay any further tax?
I am new to dealing with her affairs.
Many thanks for any response.

Lee Young
Posts: 2680
Joined: Wed Aug 06, 2008 3:26 pm
Contact:

Re: Discounted Gift Trust, Income Tax

Postby Lee Young » Mon Jul 27, 2020 3:37 pm

You should be directing your questions to the financial adviser who set it up.

The 4% "income" is not normally taxed as income, but rather subject to the chargeable event gains regime.
Lee Young
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner


Partner, Frettens LLP
lyoung@frettens.co.uk
01202 491701

maths
Posts: 7904
Joined: Wed Aug 06, 2008 3:25 pm

Re: Discounted Gift Trust, Income Tax

Postby maths » Sun Aug 02, 2020 6:16 pm

As Lee Young points out it would be sensible to ask the adviser who set it up.

In principle the return of 4% pa of the original investment should fall within the 5% tax deferred capital withdrawals thus precipitating no immediate income tax charge until a chargeable event gain arises (eg on maturity of presumably the single premium bond/encashment or death).

langtonbrow
Posts: 38
Joined: Tue Mar 10, 2009 1:52 pm

Re: Discounted Gift Trust, Income Tax

Postby langtonbrow » Thu Aug 06, 2020 1:28 pm

Many thanks. The adviser has unfortunately died. Hence the state of flux.


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