Discretionary Trusts - 10 year anniversary charge

Anthear

Hi - upon their deaths, my parents set up Discretionary Trusts for my children.

At the present time, as neither are tax payers, the trust pays tax and then they children reclaim the tax paid as the income sits within their annual personal allowance.

I understand that every 10 years there is an 'Anniversary Charge' "which arises every 10 years after creation of the trust".  Can this charge be claimed back by the children if they are still not tax payers and the amount sits within their annual personal allowance?  And is the rate for this still 6% of the market value of the trust fund at the time of the charge?

Am I correct in thinking that upon winding up a charge arises and is a proportion of 6% depending on how long the assets have been in the Trust?

Many thanks

Jeremy535897

The "anniversary charge" to which you refer is inheritance tax, not income tax, so cannot be reclaimed by a beneficiary. Sometimes it is beneficial to make capital distributions prior to the anniversary, but the trustees need professional advice.

See: https://www.gov.uk/guidance/trusts-and-inheritance-tax

Anthear

Ahhh - OK that makes sense.  When do they count the start date of the Trust - from the DOD, or from when the funds were released into the Trust?

Yes, definitely need professional advice, have already had some, but you do come across new questions when reading up...  Thank you.

Jeremy535897

The ten year charge date is based on the date of death.