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Trusts (Capital and Income) Act 2013 2012-13

Royal Assent

(This Bill is from a previous session)

Summary

  • Bill status:

    Bill is now an Act

  • Type of Bill:

    Government Bill

Sponsors:

Last event

Summary

The Bill was introduced to the House of Lords on 29 February 2012. It will apply to England and Wales only.

It implements some of the recommendations of the Law Commission's May 2009 report 'Capital and Income in Trusts: Classification and Apportionment'. As with other uncontroversial Law Commission legislation, special procedure is in place to expedite the Bill's progress through Parliament. Second reading debates in both Houses are held in special committees, with the results being reported back to the main Houses before the Bill can proceed. The House of Lords committee stage is also held in a special public bill committee, of limited and specified membership.

The Bill aims to clarify and simplify the rules governing the treatment of the receipts and outgoings of private and charitable trusts.

In the context of trusts, capital is property that constitutes a pool of assets, as distinguished from the income earned on those assets. It may be necessary to distinguish in the terms of the trust between beneficiaries entitled to receive income and beneficiaries entitled to receive capital.

The Bill allows for:

  • the disapplication, for new trusts, of certain technical rules requiring the apportionment of receipts and outgoings between income and capital, so that they only apply where the creator of the trust has specifically incorporated them
  • the rationalisation of the trust law classification of receipts from tax-exempt corporate demergers by ensuring that all such receipts are treated as capital, together with a power for trustees to redress an income beneficiary's position in appropriate circumstances
  • the simplification of the procedure for the trustees of charities with permanent endowment to adopt a total return approach to investment within a framework determined by the Charity Commission, so that the amounts retained for further investment and applied for immediate spending are determined by looking across the whole investment return rather than the technical trust law classification of receipts as capital or income