Commentary

I5.1140 Tax payable by the settlor on capital sums

IHT, trusts and estates

I5.1140 Tax payable by the settlor on capital sums

I5.1140 Tax payable by the settlor on capital sums

Where all or part of a capital payment to the settlor is treated as his income for a tax year, his miscellaneous income for that year includes the amount of the payment grossed up at the trust rate for that year1. If the settlor is entitled to any deductions and reliefs which have not been allowed against other income, he may set them against this deemed income2.

To take account of changing trust rates there is a reduction in the tax charged for a tax year (Y) on a capital sum paid to a settlor to the lowest of3:

  1.  

    (a)     tax at the trust

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