Taxes Consolidation Act 1997 section 796

Irrevocable instruments

Section 796 provides that income accumulated under an irrevocable trust for the benefit of a minor is not treated as the settlor's income, but any sum actually paid out to or for the benefit of a minor is deemed to be income and taxable on the settlor.

• Where property is held under an irrevocable instrument and income is accumulated for a minor's benefit, section 795 (which deems settled income to be the settlor's) does not apply to that accumulated income or to income arising from those accumulations.
• Any sum paid out of the trust property, its income, accumulated income, or income on accumulations to or for the benefit of a person who is a minor at the time of payment is deemed to be paid as income and is therefore taxable on the settlor under section 795.
• This deemed-income treatment is capped: it does not apply to the extent that total payments to minors since 5 April 1937 exceed the total income that has arisen in the trust since that date.
• For payments made before 6 April 1986, a person was regarded as a minor if under 21 and unmarried; from 6 April 1986 the threshold was reduced to under 18 and unmarried.