BY-PASS TRUSTS AND THE FINANCE BILL 2015

The Finance Bill 2015 confirms that with effect from 6 April 2016, lump sum death benefits paid to an individual will be taxed as income of that beneficiary. It also confirms that where a lump sum death benefit is paid to a trust (other than a bare trust) after 5 April 2016 following the death of the member at age 75 or over there will continue to be a 45% tax charge (the SLSDBC - the special lump sum death benefit charge) . This charge will therefore apply to payments to most By Pass Trusts. However, where benefits are later paid out of the trust to a beneficiary, the beneficiary may get some credit for the 45% tax charge that applied when the trustees initially received the payment of death benefits from the pension fund