Discretionary difficulty

A discretionary trust (some 20 years old and which was an accumulation and maintenance trust until 2006) allowed some of its properties to be used as security for a loan made by a high street bank to the settlor.

The trust charged a fee for this service and duly paid income tax on it.

At the time the borrower was financially sound and there were no misgivings; the trustees were then confident that no transfer of value took place.

The second ten-year anniversary has now come and gone and the borrower is in financial difficulties. The trust’s properties which are subject to the mortgage have a market value of £800 000 and the settlor’s loan stands at £425 000.

On what figure(s) should the trustees base their ten-year charge calculations?

It would seem that £800 000 should go in box F1 and the £425 000 mortgage...