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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income and gains: Accrued Income Scheme - beneficial interest changes

Change results from the terms of the trust

The terms of a trust may often result in changes in beneficial interests. For example, on the death of a life tenant the trust assets may pass absolutely to another beneficiary. Such changes in beneficial interest have no accrued income scheme consequences. Either there is no actual transfer, or the transfer simply produces self-cancelling deemed profits and losses.

Change follows an action by the trustees

Sometimes a change is not a direct result of the terms of the deed. Trustees can use their powers to advance interests or appoint property. The exercise of these powers can amount to a transfer.

‘Stranded’ Accrued Income Scheme loss

A change in beneficial owner can result in an Accrued Income Scheme loss being ‘stranded’. It is no longer available to set against the interest. For example, the trustee could have bought securities ‘cum dividend’ (with a right to the dividend). Shortly afterwards a beneficiary could become absolutely entitled to the trust assets following a contingency. The contingency does not involve any transfer for Accrued Income Scheme purposes. This means the trustee’s Accrued Income Scheme loss is lost. The beneficiary was never entitled to the loss, so cannot set it against subsequent interest.