TSEM4505 - Settlements legislation: certification under S646 ITTOIA

Sections 624 and 629 ITTOIA treat income as that of the settlor. This can create additional tax liability on the settlor. He or she can recover this tax from the trustees or other recipient. To do so the settlor can require a certificate showing such income and the tax paid. From 2006-2007 the trustees of settlor-interested accumulation/discretionary settlements are no longer exempt from liability at the special trust rates (see TSEM3015). In the case of resident accumulation/discretionary trusts the trustees will now usually be chargeable at the same rates as the settlor (exceptionally, the settlor may be chargeable at lower rates if he or she is not a higher rate taxpayer). As the settlor receives a credit for tax accounted for by the trustees he or she is unlikely to have additional liability in these circumstances and so there should be fewer requests for certificates.

Where a certificate is requested calculate the additional tax. Check the settlor has paid it. Prepare a certificate on plain notepaper. The wording is at TSEM4510. An Officer of Revenue and Customs must sign and date the certificate.

You need an original certificate and three copies.

• The original goes to the settlor or agent to send to the trustees or other person they keep it in support of the accounts.
• A copy goes to the settlor or agent for personal use.
• A copy goes in the settlor’s file.
• A copy goes in the trust file.

These certificates can be prepared and issued by either

• the settlor’s office or
• the Trust office.