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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income and gains: vulnerable beneficiaries - Introduction

The Finance Act 2005 (Sections 23 to 45) introduced a new regime for certain trusts with vulnerable beneficiaries, which took effect from 6 April 2004. The broad aim of the special tax treatment is to protect trusts with vulnerable beneficiaries from the increase in the special trusts rate and the dividend trust rate that occurred on the same date. It does this by ensuring that the amount of tax charged on income and gains arising to the trustees is no more than it would have been had the income and gains arisen directly to the vulnerable person.

The special tax treatment applies to both income tax and CGT.