# INTM367890 - DT applications and claims: Non-resident beneficiaries of UK trusts

## Example of a manual calculation under ESC/B18

In the tax year 2004-200 a trust had income from the sources shown below (gross except for dividends paid). The trustees made net distributions of £1000 each to one beneficiary in Canada (who has made a claim to us) and to one beneficiary in the UK.

• UK dividends paid £1292
• UK interest £1000
• Rents £500
• Foreign dividends £880
• Foreign interest £1000

Trustees net management expenses were £500

First, deduct trust management expenses from dividends: 1292 less 500 = 792

Then calculate income available for distribution:

 Dividends 792 plus (tax credit at one ninth of the dividend) 88 = 880, less (dividend trust rate 25%) 220 = 660 Interest 1000 less (tax at rate applicable to trusts 34%) 340 = 660 Rents 500 less (tax at rate applicable to trusts 34%) 170 = 330 Foreign dividends 880 less (tax at dividend trust rate 25%) 220 = 660 Foreign interest 1000 less (tax at rate applicable to trusts 34%) 340 = 660 Total available for distribution: 2970

Distribution: (2 x 1000) = 2000; this is less than the total available for distribution, so no spreadback required

Allocation to beneficiary:

Dividends:

(660 ÷ 2970) x 1000 = 222.22

Interest:

(660 ÷ 2970) x 1000 = 222.22

Rents:

(330 ÷ 2970) x 1000 = 111.11

Foreign dividends:

(660 ÷ 2970) x 1000 = 222.22

Foreign interest:

(660 ÷ 2970) x 1000 = 222.22

Grossing up and deducting net to find tax attributable under ESC/B18:

Dividends:

(222.22 ÷ 75) x 90 = 266.66 - 222.22 = tax 44.44

Interest:

(222.22 ÷ 66) x 100 = 336.70 - 222.22 = tax 114.48

Rents: (there is actually no need to calculate this, as there is no relief, but the calculation would be as follows)

(111.11 ÷ 66) x 100 = 168.35 - 111.11 = tax 57.24

Foreign dividends:

(222.22 ÷ 66) x 100 = 336.70 - 222.22 = tax 114.48

Foreign interest:

(222.22 ÷ 66) x 100 = 336.70 - 222.22 = tax 114.48

### Calculating the repayment due

In this example the claimant is claiming under the Double Taxation Convention with Canada on dividends and interest, and under UK legislation applying to non-residents on foreign income. Under the treaty there is a 15% restriction on dividends and a 10% restriction on interest.

Dividends:

 Gross 266.64 x 15% = 40 restriction Tax 44.44 less 40 = 4.44 (a)

Interest:

 Gross 336.70 x 10% = 33.67 restriction Tax 114.48 less 33.67 = 81.21 (b)

Foreign dividends:

 Gross 336.70 Tax 114.48 (c)

Foreign interest:

 Gross 336.70 Tax 114.48 (d)

 Total repayment (a + b + c + d) 314.61
(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)