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 (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 (TSEM1025)

In normal circumstances the interest is taxable at the rate applicable to trusts. Trustees must include it on trust returns.

Exceptionally, if the trustees claim there is no liability, refer the trust file to –Residency – Business Support Group, Nottingham for authority to accept this.

If CNR3 give such authority, and the trustees make income distributions, refer the trust file to Residency – Non Resident Trust for advice.

Tax cases

Williams v Singer 7 TC 387