Commentary

E1.960A Calculation of the gross amount payable by trustees, and refund due to them

Personal and employment tax

E1.960A Calculation of the gross amount payable by trustees, and refund due to them

E1.960A Calculation of the gross amount payable by trustees, and refund due to them

Tax-free annuities which have been bequeathed in wills can result in a situation where the annuitant1:

  1.  

    •     must repay some or all of any refunded tax to the trust, or

  2.  

    •     can recover tax suffered at higher rates from the trust

For a discussion of the different types of tax free annuities see E1.960.

The gross amount of the annuity bequeathed by the testator is obtained by simply grossing up the stated annuity at the prevailing basic rate of income tax2. Tax is withheld from the payment at the basic rate and paid over to HMRC3.

If the annuitant is entitled to a refund from HMRC then he must claim that refund and repay some or all of it to the trust. If only some of the withheld tax is refunded then the trust effectively bears the cost of the tax that is not refunded by HMRC.

This

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