TSEM3756 - Trust income and gains: beneficiaries: individual beneficiary receives discretionary income payment from a resident trust: trust not settlor-interested
In the case of trusts or settlements that are not settlor-interested a discretionary income payment is treated as an amount that is net of tax at the trust rate. »Ê¹ÚÌåÓýapp beneficiary’s income is the net amount grossed at the trust rate. It carries tax credit at that rate. It is available for relief or repayment.
»Ê¹ÚÌåÓýapp gross amount is an annual payment. It is a new source of income, usually not identified with the underlying trust income. Cunard’s Trustees v CIR (27 TC 122) supported the view that when the trustees exercised their discretion, a new source of income came into existence. Certain beneficiaries can claim relief under extra-statutory concession B18. This allows them the exemption or reliefs they could have claimed if they had received the underlying trust income directly.