Trusts Capital and Income Act 2013

The Trusts (Capital and Income) Act 2013 received Royal Asset on 31 January 2013 but is not yet fully in force.  This will insert a new Section 104A into the Charities Act 2011 to allow trustees of charities with permanent endowment to adopt a ‘total return’ approach to investment.

A total return approach can give charities greater flexibility in achieving their investment objectives.  This is because the focus is on investments that are expected to give the best performance in terms of their overall return, rather than on investments which will give the ‘right’ balance between capital growth and income.

The trustees can then allocate whatever portion of the total return they consider appropriate as income – this can be spent in furthering the aims of the charity.  The balance remaining is carried forward as unapplied total return and invested as capital to ensure the future viability of the charity.

Previously, trustees have had to obtain the Charity Commission’s consent to adopt a “total return” approach.  This will no longer be necessary for new trusts once the Act comes into force.

If you would like any information on the Act, please contact Julie Garbutt in our Private Client team using [email protected] or 0191 211 7863.