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Finance Act 2014

Section 291: Trusts With Vulnerable Beneficiary: Meaning of “Disabled Person”


1.This section extends from 6 April 2014 the definition of “disabled person” used in relation to trusts with a vulnerable beneficiary to include those in receipt of the mobility component of disability living allowance at the higher rate, or the mobility component of personal independence payment at either the standard or enhanced rate.

Details of the Section

2.Subsection (2)(a) extends that part of the definition of “disabled person” at Schedule 1A to Finance Act 2005 that applies to recipients of disability living allowance to include those in receipt of the mobility component at the higher rate (as well as those in receipt of the care component at the highest or middle rate); and subsection (2)(b) extends that part that applies to recipients of personal independence payment to include those in receipt of the mobility component (as well as those in receipt of the daily living component).

3.Subsections (3) and (4) make consequential amendments to paragraphs 3 and 4 of Schedule 1A to ensure that a person is treated as a disabled person if he or she would be entitled to receive the relevant disability living allowance or personal independence payment were it not for them being resident outside the UK or in a care home, hospital or prison.

4.Subsection (5) provides for commencement.

Background Note

5.Special tax rules exist for trusts with a disabled beneficiary. The rules:

  • Reduce the trustees’ tax liability on income and chargeable gains to an amount that, broadly, would be chargeable on the beneficiary if the gains had accrued and/or the income had arisen directly to that person.

  • Extend the annual exempt amount of chargeable gains that applies to trusts to match that available to individuals; and

  • ignore the normal charges to inheritance tax for trusts; instead, the property is treated as part of the beneficiary’s estate on their death.

6.Finance Act 2013 introduced a common definition of “disabled person” at Schedule 1A to Finance Act 2005.

7.Disability living allowance consists of a care component and a mobility component.  The care component is payable at three rates – highest, middle and lowest. The mobility component is payable at two rates – higher and lower. Following the introduction of the Welfare Reform Act 2012, the allowance is being phased out for those of working age.

8.Personal independence payment consists of a daily living component and a mobility component. Both the daily living component and the mobility component are payable at two rates – standard and enhanced.

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