Tax on income distributions from non-resident trusts

Produced by Tolley

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Tax on income distributions from non-resident trusts
  • Introduction
  • Fixed interest ― Baker type
  • Fixed interest ― Garland type
  • Discretionary interest
  • ESC B18 ― concession for claiming repayment
  • Non-domiciled and deemed domiciled beneficiaries

Introduction

The tax liabilities of UK resident beneficiaries of non-resident trusts are governed by a series of ‘tax hierarchy’ rules. See the Tax on UK resident beneficiaries of non-resident trusts (overview) guidance note.

The first step is to establish whether:

  1. the beneficiaries’ entitlement under the trust is fixed or discretionary, and

  2. any payment is capital or income

The nature of the beneficiaries’ interest will help to determine what type of payment it is. This is discussed further in the Tax on UK resident beneficiaries of non-resident trusts (overview) guidance note.

Payments of and entitlement to income are subject to income tax according to the principles set out in this guidance note.

There are special rules where income is distributed from a settlor-interested trust. These are described in the following guidance notes:

  1. Tax on UK resident settlors of non-resident trusts

  2. Settlor-interested trusts

  3. Settlor-interested trusts ― calculations and compliance

If it is a distribution of capital, tax is charged according to the rules set out in the Tax on capital payments from non-resident trusts guidance note.

The Non-domiciled and deemed domiciled beneficia

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