The Finance Act 2005 (sections 23 to 45) introduced a new income and capital gains tax regime for trusts for vulnerable persons.

The special tax treatment is to ensure that the amount of tax charged on income and gains arising to the trustees is no more than it would have been had the income and gains arisen directly to the vulnerable person. To obtain the special treatment, the trustees and the vulnerable person need to make a joint vulnerable person election.

The trust also needs to be a "qualifying trust" which means that there are certain restrictions on who can receive benefits from the trust during the vulnerable person's lifetime.

For further information, see Practice notes: