Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Italian authorities and their European counterparts have arrested 43 people and seized assets worth €520mn including luxury cars and boats in a crackdown on an alleged tax fraud scheme run by Italian mafia groups.

The European Public Prosecutor’s Office, which led the investigation, said members of several Italian criminal groups came together to run a complex and “highly profitable tax evasion scheme”. The scheme, dubbed a “VAT carousel fraud”, involved invoices for €1.3bn worth of laptops, earpods and other electronic goods.

The alleged fraud involved the creation of fake companies — or “missing traders” or “ghost companies” — in Italy, other EU countries and other countries outside the EU, which would buy and sell goods between them, then vanish without fulfilling their tax obligations.

The network provided a paper trail for claims for fraudulent VAT reimbursement from Italian authorities. 

The assets frozen on Thursday, to compensate the EU and Italian authorities for money lost through the unwarranted VAT reimbursements, includes 129 bank accounts, nearly 200 apartments, homes and other real estate holdings, and 44 luxury cars and boats, the EPPO said.

Participants in the scheme included members of the Naples-based Camorra and Sicily’s Cosa Nostra, which invested as a means of laundering money from other criminal activities, Italian authorities said.

“Mafia methods” were used to “settle conflicts that arose within the criminal syndicate between the members of the different criminal organisations”, the EPPO said in a statement. 

Of those arrested on Thursday, 34 have been sent to prison to await trial, while nine are under house arrest, authorities said. In addition to the 43 people held in Italy, seven European arrest warrants were issued for suspects in Bulgaria, Czech Republic, the Netherlands, Spain and non-EU countries.

In total, police across 10 EU countries carried out searches at about 160 locations on Thursday as they hunted for more evidence of the scheme, which is believed to have involved at least 195 people and about 400 companies.

Laura Kövesi, the European chief prosecutor, said the case was a “defining investigation” for the EPPO, which has grown increasingly anxious about the penetration of Italy’s sophisticated organised crime groups into financial fraud across Europe. 

“It has been a while since we started to ring the alarm bell about dangerous organised crime groups’ heavy involvement in fraud [against] the EU budget,” she said, citing the “colossal damages” and “the threat to our internal security” caused by such activities.

“We now shed light on a first such big case,” Kövesi said.   

Italian Prime Minister Giorgia Meloni hailed the arrests and the asset seizures, which she said demonstrated “the government’s firm commitment to combating tax evasion, one of our top priorities”.

The crackdown on Thursday comes seven months after Italian authorities seized assets worth €600mn — including villas, luxury cars, watches and jewellery — and arrested 22 people in connection with alleged fraud involving the EU’s €800bn post-pandemic recovery fund.

Of those accused in that case, two have already admitted to wrongdoing through a plea deal, while the trials for the rest began this week.

The term ‘disabled persons trust’ is frequently used to describe any trust where a beneficiary is deemed vulnerable or disabled. It is not a specific type of trust.

A disabled persons trust can be any discretionary, interest-in-possession or absolute trust. The key is whether the beneficiary’s vulnerability qualifies the trust for income and capital gains tax (CGT) relief or if their disability qualifies the trust for special inheritance tax (IHT) treatment.

So, who qualifies as a vulnerable or disabled beneficiary?

Vulnerable only:

• A child under 18 where at least one parent has died – known as a ‘relevant minor’

Vulnerable and disabled:

• A person with a mental health condition covered by the Mental Health Act 1983
• A disabled person who is eligiblefor any of the following benefits (even if they’re not receiving them): adult disability payment; armed forces independence payment; attendance allowance; child disability payment; constant attendance allowance; disability living allowance (for adults or children); industrial injuries disablement benefit; personal independence payment.

Income tax and CGT relief

Trusts with a vulnerable beneficiary can make a ‘vulnerable beneficiary election’ with HM Revenue & Customs, allowing them to qualify for income tax and CGT relief.

Where the trust has a liability to income or CGT, they may be eligible for a deduction. This is calculated as follows:

1. Trustees calculate the trust’s tax liability – using the trust rates of tax and assuming no relief
2. Trustees then calculate the tax liability the vulnerable person would have on the same income/capital gains if taxed at their marginal rate.
3. The trustees claim the difference between these two figures as a deduction on their tax liability.

The relief only applies if it is the trust which is liable to the tax.  For example, a discretionary trust in receipt of interest and dividends. Absolute trusts place the income tax and capital gains liability on the beneficiary directly, so the relief is not necessary.

Higher CGT exemption

Trusts eligible for the vulnerable beneficiary election will have a higher CGT annual exempt amount. This is currently £3,000 (2024/25, usually £1,500), though this allowance may be reduced where the settlor has created multiple trusts.

Trusts which hold investment bonds

Bonds are taxed under chargeable event rules, chargeable gains are tax as income. Under these rules, the settlor of a discretionary or interest in possession trust is liable to income tax on gains arising during their lifetime or tax year of their death. The trustees only have a liability in the following tax years. Even then, the bond can be assigned directly to a beneficiary to be taxed at their marginal rate. Therefore, it may not be necessary for the trustees to make the vulnerable beneficiary election.

If the trust has multiple beneficiaries

If there are beneficiaries who do not qualify as vulnerable, the trustees must segregate assets held for them. The relief only applies for the portion of the trust fund held for the vulnerable beneficiary.

If there is more than one vulnerable beneficiary, the trustees must make an election for each.

Claiming the relief

Trustees must first submit a vulnerable beneficiary election form (VPE1) to HMRC. If there is more than one vulnerable beneficiary, one form must be submitted for each.

Trustees claim the income tax and CGT relief when submitting their annual self-assessment (SA900). Self-assessment must be completed by 31 January following the end of the tax year.

The relief ends on the death of the vulnerable beneficiary, or if they cease to qualify.

Calculating the relief can be complicated, so trustees should consider engaging an accountant. Example calculations are also available from HMRC.

Inheritance tax

A trust may receive special IHT treatment where one of the following applies:

• One or more beneficiary is disabled or has a condition which is expected to make them disabled.
• The trust is a ‘bereaved minors’ trust. This is where one or more of the beneficiary’s parents has died creating a trust in their will (or via the rules of intestacy) for their minor child.

The following special treatment is applied:

• A gift to a disabled persons trust is a potentially exempt transfer regardless of the type of trust used. This means there will be no 20% entry charge for exceeding the nil rate band.
• Trusts will not be subject to the 10-yearly periodic or exit charges.

Restrictions on the trust fund

To qualify, there are restrictions which must be followed:

• For trusts created before 8 April 2013, at least half of the payments from the trust must go to the disabled person during their lifetime.
• For trusts created on or after 8 April 2013, all payments must go to the disabled person. However, up to £3,000 per year (or 3% of the trust’s value, if lower) can be paid to other beneficiaries.
• Trusts of bereaved minors (trusts created by the will of the child’s parent) must pay all assets to the beneficiary on attaining age 18 or before.

While it is possible to use an ‘off the shelf’ draft trust deed, a settlor of a disabled persons trust may choose instead to instruct a legal adviser to draft a bespoke trust document which enforces these restrictions on the trustees.

On death of the beneficiary

Any part of the trust fund held for a disabled beneficiary is treated as part of their estate for the purposes of calculating their IHT liability.

Claiming the special treatment

There is no election or application required for the treatment to apply. However, trustees and settlors are advised to keep good records which can help them demonstrate that the special treatment applies if needed.

Means-tested benefits

A settlor looking to create a trust for a disabled or vulnerable person is likely to be keen not to disrupt any entitlement to means tested benefits. These are benefits where an individual’s capital and income are used to assess whether they are entitled to a benefit and how much they might receive.

Bare trust

Any assets held in a bare trust will be considered for any means-tested benefits the beneficiary claims. This is because the beneficiary has a vested right in the trust fund. There is one notable exception to this; capital and income are excluded from means testing if the trust settled with the award of a personal injury claim for the beneficiary of the trust. The trust must be settled within 12 months of the award.

Discretionary trust

Any assets held within a discretionary trust are not usually considered for means tested benefits as no beneficiary has a vested right in the trust fund. However, any capital or income paid to the beneficiary will be considered in the assessment.

In either case, the position is unchanged if a beneficiary qualifies as a vulnerable or disabled person.

 Trust registration

Trusts for disabled beneficiaries or bereaved minors are exempted from registration during the lifetime of the disabled beneficiary. If the trust ceases to qualify for special treatment the trustees must register the trust within 90 days.

Disabled persons trusts:

*Rate applicable to trusts: Income Tax 39.35% (dividend) 45% (all other income). 0% on all income if below £500. Capital Gains 20% annual exempt amount up to £1,500) 2024/25

**Assuming the trust fund is applied for the vulnerable beneficiary.

Rachael Griffin is a tax and financial planning expert at Quilter

Good morning and welcome to White House Watch. Let’s dive into:

• Republicans’ impending grip on Washington

• The anti-woke Pentagon pick

• A shocking attorney-general choice

Donald Trump took a victory lap through Washington yesterday, meeting Joe Biden and relishing Republicans’ impending grip on power.

The president-elect’s hold on Washington is complete. Last night Republican lawmakers secured a majority in the House, giving them control of both chambers of Congress. With loyal allies in the House and Senate, Trump will have a firmer grasp on Congress than in his first term and latitude to push through his legislative priorities. [free to read]. 

A top aim will be renewing and expanding the sweeping tax reforms Trump enacted during his first term. He also wants to curb regulation, overhaul healthcare, carry out “mass deportations” of undocumented migrants and slap huge tariffs on imported goods.

Yesterday, the president-elect gave Speaker of the House Mike Johnson a ringing endorsement, calling for the fierce Trump ally to keep his gavel should the chamber be called for Republicans.

But this doesn’t mean it will be completely smooth sailing for Trump.

Republicans chose South Dakota senator John Thune to be the Senate majority leader, setting him up as a potential check on Trump’s agenda. This was a rebuke to Trump allies, including Elon Musk, who pushed for Florida senator Rick Scott to get the job. 

Thune is viewed as more of an “establishment” Republican. He and Trump have had a frosty relationship in the past, though the senator said that “this Republican team is united behind President Trump’s agenda”.

Even though Johnson has won an internal Republican nod to keep the speakership, holding on to the gavel is not guaranteed. He faces election by the full House, and many of his potential detractors saw this closed-door election as a soft vote, with real negotiations to take place between now and January 3, Florida representative Anna Paulina Luna told reporters. 

As Trump plucks House Republicans for executive branch roles, he also threatens Johnson’s margins.

And Democrats, along with a handful of moderate Republicans, could still throw up roadblocks by exerting leverage in narrow but meaningful ways. Most legislation needs to pass the Senate with 60 votes. Since Republicans hold 53 seats, Democrats could block some of Trump’s legislative goals.

Transitional times: the latest headlines

What we’re hearing

As Trump stacks his national security team with hardliners and loyalists, his pick for secretary of defence is particularly eyebrow-raising [free to read].

Pete Hegseth, a military veteran, has built a lucrative career as a Fox News personality by blaming wokeness for US blunders in Iraq and Afghanistan.

In his rightwing broadcasts, he’s outlined a vision for the US military that closely aligns with Trump’s view of the country: an intrepid fighting force that has been reduced to impotency by trying to be more inclusive.

His nomination has prompted a backlash in the US. Paul Rieckhoff, founder of Independent Veterans of America, which helps politically independent veterans run for office, said:

He is unqualified, and he is the most overtly and extreme political nominee we’ve ever seen. This is a bomb thrower.

Former Trump administration officials who have liked the president-elect’s other picks for top national security jobs have been dismayed by his Pentagon choice, with one telling the FT that the decision was “crazy”. And some Republican senators — who will need to confirm Hegseth’s appointment — don’t seem completely convinced by his nomination.

His selection has also shocked the US’s European allies. He’s “a total clown show”, said John Foreman, former UK defence attaché in Moscow. “The guy seems interested in fighting culture wars within the Department of Defense and purging enemies.”

Hegseth’s view of the military can be boiled down to a line in his book, titled The War on Warriors: Behind the Betrayal of the Men Who Keep Us Free, where he warns that “red-blooded American men will have to save” the liberal elite’s “candy asses”.

Team 47: who’s made the cut

Controversial Florida congressman Matt Gaetz, who resigned last night, has been tapped to be attorney-general.

Trump has nominated former congresswoman Tulsi Gabbard, who is known for her pro-Russia views, to be director of national intelligence.

John Ratcliffe, who was DNI during Trump’s first term, has been selected as CIA director.

Trump has chosen Elon Musk and Vivek Ramaswamy to lead a “department of government efficiency” to slash government rules, bureaucracy and spending.

Ex-Arkansas governor Mike Huckabee will be the US ambassador to Israel, while investor Steve Witkoff will be Trump’s special Middle East envoy, choices celebrated by the Israeli right.

Wall Street investors Scott Bessent and Howard Lutnick are the leading contenders to be Treasury secretary.

Viewpoints

OVER a quarter of a million households have had their benefit payments stopped after failing to act on a key deadline.

New government figures show 318,834 (up from 284,660 reported in August) benefits claimants have lost out by not moving to Universal Credit within an important three-month window.

Two million people on legacy benefits are gradually moving to Universal Credit under a process known as managed migration.

Universal Credit was set up to replace legacy benefits and kicked off in November 2022 after a successful pilot in July 2019.

As part of the process, eligible households on legacy benefits, including tax credits, are sent “migration notices” in the post which tell them how to make the move to Universal Credit as it’s not automatic.

Households must apply for Universal Credit within three months of receiving their managed migration letter.

Failing to do this can result in benefits being stopped.

Between July 2022 and September 30, 2024, the Department for Work and Pensions (DWP) sent almost 1.4 million migration notices.

However, according to the DWP’s latest figures, 318,834 individuals lost their benefits after failing to act on migration notices received between July 2022 and June 2024.

Some 883,944 individuals have since made successful claims for Universal Credit, and another 166,594 are still in the process of transitioning.

Ayla Ozmen, director of policy and campaigns at Z2K, said: “We’re concerned to see that more people have had vital benefit payments stopped as part of the government’s plan to move people on to Universal Credit.

“The government now looks to have moved all disabled people on to Universal Credit by March 2026, and we are worried that more people may miss the deadline and have their benefits stopped, with potentially disastrous results.

“The government needs to ensure that appropriate safeguards are put in place to stop disabled people being left with nothing to live on.”

Experts have previously warned that managed migration poses a risk to vulnerable people who face losing money.

Top bosses at charities, including Mind, The Trussell Trust, Turn2Us and the Money and Mental Health Policy Institute, said in 2022 that around 700,000 with mental health problems, learning disabilities, and dementia could struggle to engage with the process.

More than 20 organisations have called on the government to halt managed migration to fix flaws in the system that could cause those at risk to fall through.

MANAGED MIGRATION PROGRESS

In January, the government announced the number of migration notices it plans to send out in the coming financial year.

Before this date, the focus was sending migration notices to households claiming tax credits only.

However, 110,000 income support claimants and a further 120,000 claiming tax credits with housing benefit started receiving their letters in April.

Over 100,000 housing benefit-only claimants were contacted in June.

More than 90,000 people claiming employment and support allowance (ESA) along with child tax credits started being asked to switch in July.

Meanwhile, 20,000 claimants on jobseekers allowance (JSA) were contacted in September.

The Sun previously reported that, in August, those claiming tax credits who are over state pension age will be asked to apply for either Universal Credit or pension credit.

It was initially planned that those claiming income-related ESA alone would not be moved until 2028.

However, the DWP brought forward plans to move these households to Universal Credit by the end of 2025.

Since September 2024, 800,000 households have begun receiving letters explaining how to move from ESA to Universal Credit.

HELP CLAIMING UNIVERSAL CREDIT

As well as benefit calculators, anyone moving from tax credits to Universal Credit can find help in a number of ways.

You can visit your local Jobcentre by searching at find-your-nearest-jobcentre.dwp.gov.uk/.

There’s also a free service called Help to Claim from Citizen’s Advice:

• England: 0800 144 8 444
• Scotland: 0800 023 2581
• Wales: 08000 241 220

You can also get help online from advisers at citizensadvice.org.uk/about-us/contact-us/contact-us/help-to-claim/.

AN up-and-coming seaside town is set to get a huge new adventure park as part of a multi-million renovation.

The new playground will be part of the Newhaven Fort, which is currently closed.

3

3

Advertisement

The park will be a “a celebration of Victorian innovation” which mirrors the fort’s history.

There will be a large tubular slide attached to a Victorian “dirigible” – a blimp like structure.

A steam crane-inspired lookout tower, with a secret entrance for kids.

The sheltered play area is called Ardagh’s workshop, named after the Fort’s original architect, Lieutenant John Charles Ardagh.

There will also be accessible play features such as “sound play, sensory items, interactive speaking tubes and an accessible trampoline and roundabout”.

CAP.CO has an impressive track record, having created outdoor play spaces at numerous heritage sites including Windsor Great Park, Blenheim Palace and the National Maritime Museum.

It has been created by adventure play specialists CAP.CO, who have also worked on projects and Blenheim Palace and Windsor Great Park.

designer and ‘Professor of Play’ Jono Burgess said they wanted the design to “reflect the history and character of the fort”.

They added: “Since the Fort was built in the Victorian era, we wanted to celebrate the ingenuity and inventive spirit of the 1800s.

“Our goal is to design and build an inclusive adventure playground which kids will want to return to again and again to challenge themselves, make new friends and have fun.”

Newhaven Fort will reopen in February 2025, following a £7.5million restoration.

The fort was the largest defence network built in Sussex in the 19th century, built due to the threat of Napoleon the Third.

Along with the playground there will be new interactive exhibitions and a refurbished Battery Observation Post with views out to sea.

The seaside town has revealed plans to become a more popular staycation destination.

Near to Brighton and Eastbourne, Newhaven’s only beach could reopen.

West Beach closed back in 2008 due to safety concerns but hopes to reopen soon.

There are also 15 huge murals across Newhaven as part of the June Look Again Supergraphics Festival.

Newhaven was even nearly home to the UK’s largest waterpark but these plans were scrapped.

Corinne Day, programme director at Newhaven Enterprise Zone (NEZ), said: “Having an updated town centre is just one of the factors that will build on its success as we look to transform Newhaven into a major contributor to the Sussex economy by 2030.”

Sussex was recently named one of the best places to visit in 2025.

And here’s West Sussex’s best kept secret, according to locals.

3

Reuters

Which pension funds are involved?

Why copy Canada and Australia?

Why is bigger supposed to be better?

Does everyone agree with the idea?