Discretionary trust distributions

There can often be some doubt about whether a payment to a beneficiary of a discretionary trust is an income distribution or a capital payment.
In a case where the only asset of the trust is a life assurance bond and the trustees just withdraw 5% of the original capital annually so that the trust has no taxable income for 20 years is a regular distribution of that amount to a beneficiary regarded as a payment out of trust capital or would it be deemed to be income?

If the payments from the trust are deferred and paid say every three or four years would this make any difference?

I should be interested in readers' thoughts on this matter.

Query T17 101 – Dispenser.

Reply by Digby Bew:

The issue raised here can be of some significance for both the trustees and...