188体育

Where the operation of the settlements legislation results in a repayment to the settlor in excess of any repayment otherwise due, the settlor should pay that excess to the trustee or other person who received the income. Tax paid by trustees will usually be that paid on their income under ITTOIA/S646(8) but it will also include any money they may have paid to the settlor under ITTOIA/S646(1) (see TSEM4505)).

ITTOIA/S624 and 629 are deeming provisions. In recognition of the fact that a settlor will be taxed on income that does not belong to them, ITTOIA/S646(1) provides for the trustees to provide the settlor with money to enable them听to pay the tax due to HMRC. Where the tax paid by the trustees exceeds that due from the settlor, they are听required to return the excess to the trustees. The amount of tax to be returned to the trustees will be:

Tax paid by trustees under ITTOIA/S646(8)

plus

Any money to pay tax provided to the settlor under ITTOIA/S646(1)

less

The amount of tax charged on the settlor in respect of settlement income

It is not necessary for an actual repayment to be made for the legislation to apply. The reference to a 鈥榬epayment鈥� includes a set-off of tax ultimately borne by the trustees.

Example

Trustees鈥� income in 2023-24

Income	听听听听听罢辞迟补濒
Property income	拢10,000
Tax paid (646(8))	拢1,000 @ 20%
-	拢9,000 @ 45%
听 Total tax paid	听 拢4,250

Settlors income in 2023-24	Total
Income from Property	拢60,000
鈥楽ettlement鈥� Income	拢10,000

Tax due from settlor	-	-
拢12,570听(personal allowance)	Nil	-
拢37,700 @ 20%	拢7,540	-
拢19,730听@ 40%	拢7,892	(includes 拢4,000 on settlement income)
Total Tax due	拢15,432	--
Less tax credit from trustees	拢4,250	---
Tax due per settlor鈥檚 self assessment	拢11,182	--

Here there will be no actual repayment made by HMRC but the tax due from the settlor is reduced by the tax credit of 拢4,250听of which only 拢4,000 has been used against settlement income. 拢250听should be paid by the settlor to the trustees. That is made clearer if we consider the tax position of the settlor in the absence of the settlement income:

Settlor鈥檚 income in 2023-24

Income from Property 拢60,000

Tax due from settlor	Total
拢12,570(personal allowance)	Nil
拢37,700 @ 20%	拢7,540
拢9,730 @ 40%	拢3,892
Total Tax due	拢11,432
Tax due per settlor鈥檚 self assessment	拢11,182

The 拢250 difference between 拢11,432听and 拢11,182听is the tax 'overpaid' by the trustees

Where the settlor has difficulty in working out the amount of the 鈥榬epayment鈥� to be paid to the trustees they听can ask听HMRC to issue a certificate showing the amount of the repayment due to the settlor in respect of the income treated as belonging to them.听Information concerning the settlor鈥檚 tax affairs cannot be divulged to anyone without the permission of the settlor.

To request a certificate the settlor should submit a copy of form R185(Settlor) or any other notification of income and tax paid by the trustees to the settlor. HMRC听will not be able to issue the certificate until the settlor鈥檚 liability for the year has been calculated, such as听their tax return or R40 has been processed.

The R185(Settlor) should confirm the information already declared on the tax return or R40. If the total liability for the year has been calculated the certificate can be issued.