TSEM4575 - Settlements legislation: how settlor returns income

Years up to and including – 2005-06

Settlor is a life tenant (beneficiary entitled to the trust income as it arises)

The settlor returns the trust income, after trust management expenses, according to its source. UK source income goes on the Trust etc page (there are a few exceptions detailed in the Notes on Trusts etc.). Foreign source income goes on the Foreign pages.

The amount of trust management expenses is chargeable on the settlor under the Chapter 5 Part 5 legislation. The settlor shows it on the SA return at ‘Other income’. The grossing factor depends on the rate of tax chargeable on each source of income.

Trust is discretionary

The settlor shows the whole of the income arising to the trust on the SA return on the ‘Trusts etc’ supplementary pages. The settlor does not deduct trust management expenses. All the income is chargeable under the Chapter 5 Part 5 legislation. That is why the settlor does not show overseas trust income on the Foreign pages.

2006-2007 onwards

The settlor returns all UK source trust income, without deducting management expenses, on the Trusts etc pages. Foreign source income goes on the Foreign pages.

Credit for tax paid by the trustees (applies to all years)

The settlor receives credit for the tax paid by the trustees on any trust income deemed to be his.