TSEM10220 - Non-resident trusts: trustees鈥� chargeability: Income Tax - UK-source income - effect of ITA07/S811 - details

In simple terms, the s811 cap on tax is the sum of any tax withheld from 鈥榙isregarded income鈥� (s813) plus the tax that would be due on all non disregarded income if neither the 鈥榙isregarded income鈥� were taken into account nor any personal allowances given.

Not all UK income is 鈥榙isregarded income鈥�, for example trustees of a non-resident trust will always be chargeable to Income Tax on UK property income.

Example

Year 2013-14

Income of non-resident trust:

UK bank interest = 拢1,000. Tax deducted at source = NIL

UK property income = 拢2,000. Tax deducted = NIL

The trust is within ITA07/S479, and all the beneficiaries (income and capital) are not resident in the UK for the year 2013-14. The provisions of ITA07/S811 apply to cap the liability to income tax on bank interest.

Income tax liability is limited to the sum of:

  1. (ITA07/S811(4) the income tax deducted from bank interest (鈥榙isregarded income鈥�) -NIL and
  2. (ITA07/S811(5) the income tax liability on property income - 拢2,000:

Income chargeable at the standard rate band (TSEM10240) is 拢1,000 @ 20% = 拢200.

Income chargeable at the trust rate = 拢1,000 @ 45% =拢450

The Income Tax liability is 拢650 for the year 2013-14.