What is a vulnerable person trust?
Answered 17 March 2026
What is a Vulnerable Person Trust?
A vulnerable person trust (also called a "trust with a vulnerable beneficiary") is a settlement holding property on qualifying trusts for the benefit of a vulnerable person, which qualifies for a special tax regime under Chapter 4 of the Finance Act 2005. The regime reduces the trustees' income tax and CGT liabilities so that the tax burden is calculated by reference to the vulnerable person's own circumstances rather than the higher trustee rates.
What the law says
Definition of "vulnerable person"
The term "vulnerable person" means either (a) a disabled person or (b) a relevant minor.
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A disabled person has the meaning given by Schedule 1A to the Finance Act 2005, and includes: a person who by reason of mental disorder (within the meaning of the Mental Health Act 1983) is incapable of administering their own property or managing their own affairs; a person in receipt of attendance allowance; a person in receipt of disability living allowance (care component at highest or middle rate, or mobility component at higher rate); a person in receipt of personal independence payment; a person in receipt of an increased disablement pension; a person in receipt of constant attendance allowance; or a person in receipt of armed forces independence payment.
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A relevant minor is a person who (a) has not yet attained the age of 18, and (b) at least one of whose parents has died.
Qualifying trusts — disabled persons
Where property is held on trusts for the benefit of a disabled person, those trusts are qualifying trusts if they secure that during the disabled person's lifetime the property is applied only for their benefit (subject to a limited annual carve-out).
Qualifying trusts — relevant minors
Where property is held on trusts for the benefit of a relevant minor, those trusts are qualifying trusts if they are: (a) statutory trusts under sections 46 and 47(1) of the Administration of Estates Act 1925, or (b) trusts established under the will of a deceased parent, the Criminal Injuries Compensation Scheme, or the Victims of Overseas Terrorism Compensation Scheme — provided the minor will become absolutely entitled to the property at 18, and until then only the minor can benefit from income or capital applied from the trust.
The vulnerable person election
The trustees and the vulnerable person must jointly make a vulnerable person election. The election is irrevocable and has effect until: (a) the person ceases to be a vulnerable person; (b) the trusts cease to be qualifying trusts; or (c) the trusts are terminated.
The tax relief mechanism — Income Tax
Once a valid claim is made, the trustees' income tax liability is reduced by the difference between: (i) what the trustees would otherwise pay on the qualifying trust income, and (ii) what the vulnerable person would pay if that income had arisen directly to them.
The tax relief mechanism — CGT (UK-resident vulnerable person)
The trustees' CGT liability is reduced by the amount TQTG − VQTG, where TQTG is the CGT the trustees would otherwise pay on qualifying trust gains, and VQTG is the additional CGT the vulnerable person would pay if those gains had accrued directly to them.
The tax relief mechanism — CGT (non-UK-resident vulnerable person)
A similar formula applies, but VQTG is calculated by reference to the vulnerable person's "deemed CGT taxable amount" for the year.
HMRC guidance / practice
HMRC confirms that trustees may claim special tax treatment for a tax year if: (1) there is a beneficiary who falls within the definition of a vulnerable person; (2) the trustees hold property on qualifying trusts for that beneficiary; and (3) a vulnerable person election has effect for all or part of that tax year.
Where there is more than one beneficiary, the property for the vulnerable person must be held in a specific fund or identifiable part of the settled property for the benefit of that person.
The election is made jointly by the trustees and the vulnerable person, but the annual claim is made by the trustees alone. They are not required to claim for every year for which they are entitled to do so.
In practice, the trustees calculate their tax liability on the qualifying trust income without a claim, then calculate what the vulnerable person's liability would have been had the income arisen directly to them (taking into account the beneficiary's other income, gains and allowances), and claim the difference as a deduction from their own liability.
A vulnerable person does not need to be UK-resident to qualify as a vulnerable person, though residence affects the CGT calculation applied.
Citation sources
Trustees may make a claim for special tax treatment for a tax year if the following conditions are satisfied: there is a beneficiary who falls within the definition of a vulnerable person (TSEM3420) the trustees hold property on ‘qualifying trusts’ (TSEM3430) for that beneficiary and a vulnerable person election (TSEM3450) has effect for all or part of that tax year. Subject to TSEM3440, where there is more than one beneficiary, the property for the vulnerable person must be held in a specific f
Part 2 Income tax, corporation tax and capital gains tax Chapter 4 Trusts with vulnerable beneficiary Vulnerable persons Meaning of “relevant minor” 39 For the purposes of this Chapter a person is a “ relevant minor ” if— a he has not yet attained the age of 18, and b at least one of his parents has died.
Part 2 Income tax, corporation tax and capital gains tax Chapter 4 Trusts with vulnerable beneficiary Capital gains tax UK resident vulnerable persons: amount of relief 31 1 Special capital gains tax treatment applies for the tax year in accordance with this section if the vulnerable person is UK resident for the tax year. 2 The trustees' liability to capital gains tax for the tax year is to be reduced by an amount equal to— TQTG - VQTG where— TQTG is the amount of capital gains tax to which the
A vulnerable person is resident in the UK if they are resident here for any part of the tax year. A vulnerable person is not UK resident if they are not resident here for any part of the tax year. A beneficiary does not have to be resident in the UK to be a vulnerable person for the purposes of the special tax regime. The place of residence makes no difference to the question as to whether the beneficiary is regarded as being a vulnerable person on the basis of: being a relevant minor, or bein
ed person has the meaning given by Schedule 1A to FA 2005, which states: “Disabled person” means— a. a person who by reason of mental disorder within the meaning of the Mental Health Act 1983 is incapable of administering his or her property or managing his or her affairs, b. a person in receipt of attendance allowance, c. a person in receipt of a disability living allowance by virtue of entitlement to the care component at the highest or middle rate, or the mobility component at the higher rate