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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income and gains: vulnerable beneficiaries: definition of qualifying trusts - trustees’ power to advance capital

There are occasions when trust law gives the trustees the power to advance to a beneficiary in certain circumstances up to one half of the capital to which they will or may become entitled at a later date. The relevant provisions are section 32 of the Trustee Act 1925 in England and Wales and section 33 of the Trustee Act (Northern Ireland) 1958.

The fact that they specifically allow certain advances to be made does not prevent trusts on which property is held from being qualifying trusts. But for 2004-05 and 2005-06 this is so only in those cases where the particular statutory provision applies automatically. It does not apply where there is a provision on similar lines in the deed or will, or where the statutory provision is modified, for instance by replacing the one-half limit by a larger amount. For 2006-07 onwards, the power to advance up to one half of the capital conferred by trust law in a jurisdiction other than England and Wales or Northern Ireland or by the deed or will similarly will not prevent trusts from being qualifying trusts, as long as the provisions are the same as those in section 32 of the Trustees Act 1925.