Income Tax (Earnings and Pensions) Act 2003 section Schedule 5 paragraph 33

Meaning of "associate": trustees of discretionary trust

Section Schedule 5 paragraph 33 provides an exception to the "associate" rules for beneficiaries of discretionary trusts who have permanently given up their rights under the trust, so that they are not treated as having been interested in company shares held by the trust.

• Where a beneficiary of a discretionary trust has irrevocably given up their right to benefit — either through their own disclaimer or through the trustees permanently excluding them — they may escape being treated as an associate of the trustees.
• This exception only applies if the trust property has included shares or obligations of the relevant company, and immediately after the beneficiary ceased to be eligible, no associate of the beneficiary was interested in those shares or obligations held by the trust.
• A further condition is that during the 12 months before the beneficiary ceased to be eligible, neither the beneficiary nor any associate of the beneficiary received any benefit under the trust.
• If all conditions are met, the beneficiary is not treated as having been interested in the company's shares or obligations at any time during that 12-month period, solely because they were an object of the discretionary trust which held those shares.