186. Payments under discretionary trusts.

Where, in any tax year1, trustees of a settlement2 make an annual payment ('the discretionary payment') in money or money's worth to a person ('the beneficiary') in the exercise of a discretion (whether a discretion exercisable by the trustees or by any other person), then:

  1.  

    (1)     if the trustees are UK resident3 for the tax year; and

  2.  

    (2)     either:

    1.  

      (a)     if what is paid to the beneficiary is, only because of the payment, income4 of the beneficiary for income tax or corporation tax purposes; or

    2.  

      (b)     the payment is treated5 for income tax purposes as the income of a