INTM367880 - DT applications and
claims: Non-resident beneficiaries of UK trusts
How to manually calculate relief due under ESC/B18
Although the apportionment of the income will normally be
performed using a computer program, if necessary the calculation
can be performed manually, as follows:
- Deduct any expenses and other obligations, for example Trust
Management Expenses (see
INTM367920) and annuities (see
INTM367770), from the income received
by the trustees.
- For each income source (after deductions at 1 above) calculate
the net amount available for distribution, that is the amount after
deduction of tax at the rate applicable to trusts or the dividend
trust rate as appropriate.
- Calculate the total net distribution made to the discretionary
beneficiaries.
- Check that the total net distribution made to the discretionary
beneficiaries is less than (or equal to) the total net available
for distribution. If it is greater than the total net available for
distribution, you will need to apply a ‘spreadback’
calculation (see
INTM367910).
- Allocate the net amount of each source of income arising to the
trustees to the beneficiary’s net distribution, by the
following formula (each source of income must be treated separately
because of the different tax rates to which the trust income is
subjected):
(a ÷ b) x c =beneficiary’s share of income source,
where
- a = net income from source
- b = total income available to distribute
- c = beneficiary’s net distribution
- Calculate the beneficiary’s gross share of each income
source by reference to ESC/B18. For UK dividends the calculation
for 2004-05 onwards is
(a ÷ 67.5) x 90 = beneficiary’s gross share of
dividends for the purposes of ESC/B18, where
- a = beneficiary’s share of dividends
for 1999-2000 to 2003-04 the calculation is
(a ÷ 75) x 90 = beneficiary’s gross share of
dividends for the purposes of ESC/B18, where
- a = beneficiary’s share of dividends
For other income (including foreign dividends) the calculation
for 2004-05 onwards is
(a ÷ 60) x 100 = beneficiary’s gross share of
dividends for the purposes of ESC/B18, where
- a = beneficiary’s share of income
for 1999-2000 to 2003-04 the calculation is
(a ÷ 66) x 100 = beneficiary’s gross share of
dividends for the purposes of ESC/B18, where
- a = beneficiary’s share of income
- Calculate the tax applying to each income source under ESC/B18
by deducting the net (calculated at 4) from the gross (calculated
at 5).
- Calculate the repayment due by reference to the relevant treaty
articles, and/or UK legislation allowing relief to non-residents.
Where repayment is restricted under a double taxation agreement,
calculate the amount to restrict as a percentage of the ESC/B18
gross (calculated at 5) and deduct it from the tax (calculated at
6).
