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.
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
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)
