Trusts for Disabled People

Trusts for disabled people · Vulnerable beneficiary

Table of Contents

Trusts that protect, not penalise.

A properly structured disabled persons trust gets favourable income tax, CGT and IHT treatment – if it is set up correctly and you make the right elections each year. We make sure both happen.

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Vulnerablebeneficiary election

IHT reliefFrom periodic charges

TaxTreated as if owned by beneficiary

AnnualSA900 + R185 included

The tax system gives ground here. We help you take it.

When a trust is set up for a “vulnerable beneficiary” – typically someone disabled within the meaning of the Finance Act 2005 – it qualifies for special tax rules. The trust\u2019s income and gains can be taxed as if they belonged to the beneficiary directly, often at much lower rates than the standard trust rates. Discretionary trust IHT charges (the 10-year and exit charges) generally do not apply.

The catch: this treatment only applies if (a) the trust deed meets the statutory tests and (b) the trustees and the vulnerable beneficiary make a joint election to HMRC each year. Miss the election and you lose the tax benefit. We set up the elections, file them, and handle the year-on-year administration so the family does not have to.

In your fixed fee

What’s included

Trust deed review for vulnerable beneficiary status
Vulnerable Person Election (VPE) preparation and filing
Joint election with the beneficiary or representative
Annual trust accounts
SA900 trust tax return
R185 (Trust Income) statements for the beneficiary
Comparison of trust-rate vs vulnerable-rate tax to confirm benefit
CGT computations on disposals at the beneficiary rate
Trust Registration Service annual update
Coordination with Court of Protection deputies if required

Why Mercian

Why clients stay

A genuinely modern approach

Cloud accounting, MTD-ready workflows and secure document portals — no shoeboxes of receipts, no surprise emails in March.

Fixed fees, no clock-watching

A clear price agreed up front. Call us as often as you need without worrying about a meter running.

Senior advice, not call-centre answers

Every client has a named accountant who knows your situation — not a ticket queue.

FAQ

Common questions

Who counts as a “disabled person” for these rules?

The statutory definition covers people who, by reason of mental or physical disability, are incapable of administering their property or affairs. It also covers people receiving certain disability benefits including PIP at the higher rate. We screen against the test on the first call.

What is a Vulnerable Person Election?

A joint election between the trustees and the beneficiary (or their attorney/deputy) telling HMRC to apply the special tax rules. It must be filed every year alongside the trust return.

Does the trust avoid all IHT charges?

For most disabled persons trusts, the discretionary trust IHT regime (10-year and exit charges) does not apply. The trust property may be treated as part of the beneficiary\u2019s estate for IHT instead.

Can a will trust be a disabled persons trust?

Yes – many parents set them up by will to look after a disabled child after they have gone. The same elections and rules apply.

What if the disability changes or the beneficiary recovers?

The tax treatment depends on the beneficiary qualifying as “vulnerable” each year. If circumstances change, we reassess and switch to standard trust treatment if needed.

Related services

Want to make sure the trust is doing what it should?

Book a free 30-minute call. We will tell you straight whether we can help, what it would cost, and what to do next. No sales pitch, no obligation.

Book a free call →Email hello@mercianaccountants.co.uk