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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Close companies: capital payments to settlors: introduction


ITTOIA/S619 (1)(c) together with Section 633 prevents certain arrangements that allow a settlor to enjoy the income of a settlement without attracting further tax liability.

Where there is available undistributed income in a settlement and a capital sum is paid directly or indirectly for the benefit of the settlor or spouse by the trustees, the payment is treated as the income of the settlor. The amount treated as the income of the settlor is restricted to the amount of the available undistributed income in the settlement.

‘Capital sum’ includes a loan or repayment of a loan or any other sum (other than income) which is not paid for full consideration. See TSEM4400 for an example.

If you have a case in which Section 633 appears to apply, refer to HMRC Trusts Bootle.

For guidance on ITTOIA/S641, which extends the provisions of Section 633, see CTM61060.