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HMRC internal manual

Trusts, Settlements and Estates Manual

Trusts for particular purposes: Direct Payment trusts - types of trust

The Department of Health does not ask local authorities to adopt a uniform approach to Direct Payment trusts. Consequently different types of trust may be used.

The trust is set up via a trust deed and as always the terms of the deed determine the tax consequences. Under Self Assessment, it is up to the trustees and/or the individual (beneficiary) to self assess correctly by reference to the deed. General guidance on the different types of trust and their tax consequences is available at TSEM1563 onwards.

From information given to HMRC, it seems that a Direct Payment trust is likely to be either a bare trust or a discretionary trust. Therefore general guidance on bare trusts and discretionary trusts may be useful in the context of such trusts.

Guidance on the taxation of bare trusts is at TSEM1563 (bare trusts generally) and TSEM1563 (minors and incapacitated persons).

Guidance on the taxation of discretionary trusts is at TSEM1565 and TSEM3015.

TSEM5856 gives guidance on specific income tax aspects of Direct Payments trusts.

TSEM5858 gives guidance on Direct Payment trusts and inheritance tax.