Disabled trust tax law receives cautious welcome

by Kevin Reed

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14 Dec 2012

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A NEW PROVISION for enabling disabled people with trusts to claim tax privileged status has been cautiously welcomed by the Low Incomes Tax Reform Group (LITRG).

Favourable tax treatment has been extended to disabled people that are beneficiaries of trusts in the draft Finance Bill 2013.

There were concerns about how the changes to the care component of the disability living allowance (DLA) would affect disabled trust beneficiaries – as the DLA is a key component of gauging those beneficiaries in receiving favourable tax treatment – and whether the changes would restrict the number of people it would apply to. With the DLA to be abolished and replaced with a personal independence payment (PIP), campaigners wanted this new system enshrined in law so that the disabled could still receive tax mitigation.

Anthony Thomas, chairman of LITRG, said: "We are ... pleased that the government has listened to the views expressed by LITRG and others, and now intends to legislate so that anyone receiving the daily living component of PIP at either the enhanced or the standard rate should qualify. We are also pleased to see receipt of the Armed Forces Independence Payment brought into the qualifying criteria."

The LITRG was disappointed that its proposals about dealing with some who fall outside of being able to receive the mitigation has not been resolved in the draft legislation. It also expressed concern that more extensive alignment and simplification of the vulnerable/disabled trust regimes has not been made.

"The rules governing these trust remain as complex as ever, and discrepancies between the different rules for different taxes are not to be cleared up as we had hoped," Thomas added.

"That cannot be good for the vulnerable beneficiaries of these trusts, and will serve as a powerful disincentive to set up such arrangements. One can only hope that the Office of Tax Simplification may one day get to grips with these complexities and anomalies."

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