INTM367960 - DT applications and claims: Non-resident beneficiaries of UK trusts

Personal Allowances, rate bands and DT relief under ESC/B18

Dual claims
Tax rate bands
How relief under ESC/B18 affects personal allowances and tax bands
How to calculate relief under ESC/B18 when relief has already been allowed by way of personal allowances and/or rate bands

Dual claims

A claimant may submit both double taxation and personal allowance claims for the same distribution. The relief given under personal allowances will affect the calculation of relief due under ESC/B18. It is preferable for the simplicity of the calculation to calculate the double taxation relief first. In practice however it will often not be possible to do this as the double taxation claim will not at the time of receipt fulfil the terms of ESC/B18, whereas the personal allowance claim is not affected by ESC/B18 and, if satisfactory, will be ready for payment on receipt.

Tax rate bands

A claimant who is not entitled to personal allowances under S278 is nevertheless entitled, wherever resident, to have UK tax rate bands applied to their income. To consider applying rate bands a full declaration of all UK source income arising to the claimant is required. You therefore cannot allow relief on the basis of a double taxation claim. Any claim to tax bands is made and dealt with in the same way as a claim to personal allowances.

How relief under ESC/B18 affects personal allowances and tax bands

Income that has been relieved under a double taxation agreement, or domestic legislation applying to non-residents, is non-liable for the purposes of calculating personal allowances and rate bands. Where a treaty article restricts relief, the amount restricted remains in charge for the purposes of the personal allowance/rate bands calculation.

How to calculate relief under ESC/B18 when relief has already been allowed by way of personal allowances and/or rate bands

You will need to calculate the relief due under ESC/B18. Personal allowances/rate bands can then be recalculated to take account of the relief available under the double taxation agreement.

It is important to note that you cannot simply allow the relief that you have calculated as a repayment, as some or all of the relief due on the double taxation claim under ESC/B18 may have effectively been allowed already by the personal allowances and rate band adjustments.