578. Ascertainment of undistributed income.

Unprotected income arising under a settlement1 in any tax year2 is treated3 as unprotected income which has not been distributed so far as it exceeds the total amount of:

  1.  

    (1)     the sums paid in that tax year to any persons by the trustees of the settlement that are payments of unprotected income, or sums treated as representing unprotected income, and that are treated4 in that year as the income of those persons for income tax purposes, or would be so treated if those persons were domiciled or resident5 in the United Kingdom6 and the sums had been paid to