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HMRC internal manual

Trusts, Settlements and Estates Manual

HM Revenue & Customs
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Trusts for particular purposes: trusts administered by the Official Solicitor and Public Trustee: Criminal Injuries Compensation Authority trusts

The Criminal Injuries Compensation Authority (CICA) was set up to make compensation awards for victims of crime. Cases typically feature victims who are minors or disabled or both. Where the CICA has awarded compensation to a minor and directed it to be held on trust for the child during his minority, a settlement is normally executed by the CICA naming the Public Trustee as trustee.

Where a minor is entitled to significant damages from the CICA as a result of injuries caused by one of the minor’s parents, the Official Solicitor will advise the CICA to settle the funds for the benefit of the minor on discretionary trusts. The perpetrator of the crime will be excluded from benefit in order to avoid his or her obtaining any benefit from the award in the event that the minor dies before attaining the age of 18, or dies intestate having attained majority.

Although CICA is the direct settlor of the trust, the ‘settlements legislation’ treats a person who has indirectly provided funds for the purposes of a settlement as the settlor (see TSEM4120). The funds settled into the discretionary trust are the proceeds of a right of action. These are funds to which the minor beneficiary is entitled. The funds are therefore indirectly provided by the beneficiary which makes him or her the settlor. The beneficiary, as settlor, will therefore be liable to income tax on the income of the trustees under ITTOIA/S624.

The trustees will pay tax in the normal way but the tax is treated as paid on behalf of the settlor.


The CICA award was £300,000 and this is paid into a discretionary/accumulation trust on 6 April 2009. The trustees’ income for the year to 5 April 2010 is £24,000.

The beneficiary has no other income in the year.

Trustees’ liability

Income £24,000      
  £1,000 at 20% £200.00
  £23,000 at 40% £9200.00
Tax paid on behalf of settlor       £9400.00


Beneficiary’s liability (settlor is taxed as if the trustees income were his)


Less personal allowance £24,000
    £17,525 at 20% £3,505.00
        Tax paid by trustees £9,400.00
        Repayment £5,895.00


Where the settlor is taxed on the income of the trustees as it arises, subsequent payments made to the settlor of the trust do not carry a tax credit and are not charged to tax on the settlor -ITTOIA/S685A (see TSEM3757)