TSEM3660 - Trust income and gains relief for overseas tax: annuity from a trust

Trustees are not entitled to tax credit relief on overseas trust income they pay to annuitants.

Sometimes a beneficiary personally suffers overseas tax on the income. A trustee can claim tax credit relief on behalf of the beneficiary.

If possible, trustees treat annuities as payable out of income that does not qualify for tax credit relief. They cannot do this if

• they are legally obliged to pay the annuity out of income that qualifies for credit, or
• they have deducted overseas tax from the payment.

A paying agent may have allowed provisional tax credit relief on overseas income. If the trustees pay an annuity out of such income, they must account for any shortfall in tax. This will be the difference between

• the basic rate tax on the annuity, and
• the tax the trustees suffered on the grossed income paid out as annuity.