Trusts: When does accrued income become capital?

[BarrenFluffit]

The trust deed allocates the income for a purpose subject to trustee's discretion. The capital is passed on when the purpose has expired. The trustee's haven't used that income and it's been reinvested.

Can the trust potentially pay out all income for the purpose or does it become capital at some point?

Thoughts and particularly references welcome,

thanks,

BF

[Dod101]

I have no reference but if the trust deed advises that the income must be used for some discreet purpose subject to the Trustees' discretion then I think the Trustees need to account for it separately until the trust is wound up, and that is when I assume the trustees conclude that the purpose is no longer or has been satisfied.

I do not think that the income just morphs into capital at some point. The trustees I suppose could designate it as such but that would surely go hand in hand with any decision that the original purpose had expired, to use your expression.

Sorry. This is no more than what I see as a common sense approach and it may be totally wrong.

Dod

[Parky]

Funny, I saw something relating to accumulation of income in relation to the ten-year anniversary charge this afternoon. My understanding is that it stays as income unless you "accumulate" it into capital. HMRCs IHT manual 42088 might be a good place to start looking.

https://www.gov.uk/hmrc-internal-manual ... /ihtm42088