Accumulation and maintenance (A&M) trust meaning

See Q&A: At what point does income from a trust become accumulated and capital in nature, so that payments of the same funds are capital and the beneficiary cannot claim income tax back at their marginal rate? For present purposes, assume the trust is discretionary and that nobody has an interest in possession in its income. Accumulation denotes the transformation of income into capital; once that has happened, any later payments out of those same sums are treated as capital, and the beneficiary cannot reclaim income tax at their marginal rate. For income to be properly accumulated, certain requirements must be met: there must exist a power or trust to accumulate, granted by the trust instrument or under the Trustee Act 1925 (TA 1925), or possibly arising at common law—see Lombe v Stoughton (1841) 12 Sim 304 (not reported by LexisNexis®UK) There is also statutory authority to accumulate income from funds held for a beneficiary who is a minor, to the extent...

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The Trustees of the Panico Panayi Accumulation and Maintenance Settlements Numbers to 4 and Redevco Properties UK1 Ltd v HMRC [2024] UKUT 319 (TCC) In relation to the trustee appellant, the majority of the trustees of the relevant settlement ceased to be UK resident, instead becoming resident in Cyprus, in August 2004. The company appellant transferred its place of effective management to the Netherlands in January 2008. HMRC served closure notices on the appellants, including assessments under the exit charge provisions in the Taxation of Chargeable Gains Act 1992, ss 80 and 185 respectively. In the trustees’ case, the FTT sought a preliminary ruling from the Court of Justice of the European Union, which led to a CJEU judgment in September 2017 confirming that a trust could benefit from the four EU law freedoms and that imposing an immediate tax charge at the exit date was a disproportionate interference with freedom of establishment. The FTT determined that, notwithstanding the exit tax legislation applicable at the material times (and...

This Practice Note offers an overview of trusts in the British Virgin Islands (BVI). For broader BVI background, see Practice Note: Private Client—British Virgin Islands—Q&A guide. The principal legislation is the Trustee Ordinance (Cap 303, Law of BVI), as amended (TO), and the Virgin Islands Special Trusts Act 2003, as amended (VISTA Law). The texts are available via the further reading links to Spitz & Clarke Offshore Service in the related documents pod and on the BVI FSC—Legislation web page. Types of trusts The most frequently used BVI trusts include: discretionary trusts VISTA trusts life interest trusts fixed interest trusts Discretionary trusts A discretionary trust typically affords maximum flexibility and is the most commonly adopted and, in many cases, the most effective arrangement for both settlor and beneficiaries. Trustees are granted wide discretion regarding when distributions are made, in what amounts, and to which beneficiaries, from both income and capital. This structure is particularly valuable where, at establishment,...

ARCHIVED: This Practice Note has been archived and is not maintained. An accumulation and maintenance (A&M) settlement was a specific form of non‑interest in possession (IIP) trust created to make provision for children and young adults until they reached 25. From 1975 to 2006, A&M settlements benefited from favourable inheritance tax (IHT) treatment. That preferential position ended as part of the wide‑ranging reforms to the taxation of trusts introduced by the Finance Act 2006 (FA 2006) (see Practice Note: Finance Act 2006 changes to trust taxation [Archived]). At the same time, transitional provisions were put in place for A&M settlements made before 22 March 2006, permitting a degree of restructuring before 6 April 2008. This Practice Note considers the taxation of A&M trusts, both historically and under the post‑22 March 2006 rules. Although new A&M settlements cannot now be created, practitioners still need to understand the rules because they will continue to deal with trusts set up before 2006. Typically, an A&M trust had several beneficiaries of different ages....

Private Client England & Wales glossary A Abatement When, after settling the deceased’s funeral costs, debts and liabilities, the remaining estate cannot satisfy all legacies in full, the gifts are reduced accordingly, unless the Will shows a different intention. In a solvent estate, the order for reduction appears in Part II of Schedule 1 to the Administration of Estates Act 1925. Refer to Practice Note: Payment of legacies. Accruals basis Where income is taxed on an accruals basis, it is attributed to a given tax year by reference to the number of days within that year during which the activity giving rise to the liability accrued. See Practice Note: What is the basis of income tax?. Accumulation and maintenance (A&M) trust A form of non‑interest in possession trust designed to benefit children and young people up to 25, which received favourable inheritance tax treatment between 1975 and 2006. See Practice Note: Accumulation and maintenance trusts—IHT [Archived]. Accredited Legal Representative (ALR) ...