TSEM3185 - Trust income: FOTRA securities - resident trustees
FOTRA stands for 'Free of Tax to Residents Abroad'. The securities involved are British government gilts.
From 6 April 1998 all interest on such securities is paid gross. Trustees need to know whether or not to Self-Assess liability. This depends upon the type of trust involved and the residence status of the beneficiary.
Interest in possession trust
(see TSEM1105)
For any beneficiary who is not ordinarily resident (NOR) in the UK the interest is not taxable. Trustees should not include it on the returns. The authority for this is Williams v Singer 7 TC 387 (TSEM7070).
In any other circumstances the interest is taxable. It must go on the trust returns. Discretionary trust (see TSEM1025)
In normal circumstances the interest is taxable at the trust rate. Trustees must include it on trust returns.
Exceptionally, if the trustees claim there is no liability, refer the trust file to Business Support Team, Nottingham for authority to accept this.
If the Business Support Team gives such authority, and the trustees make income distributions, refer the trust file to HMRC Trusts & Estates Nottingham for advice.
Tax cases
Williams v Singer 7 TC 387
