TSEM4560 - Settlements legislation: beneficiary is not entitled to repayment

If the income of a settlement is to be treated as that of the settlor, refuse any claim for repayment of tax by a beneficiary. This is because, for periods to 5 April 2006, the beneficiary’s income in these circumstances is treated as nil. For periods from 6 April 2006 discretionary payments are treated as taxable income but carry a notional tax credit of 40% so no further tax is due on that income(see TSEM4570).

If there is an appeal against this, refer the trust folder and the settlor’s/beneficiary's files to HMRC Trusts Head Office Edinburgh.