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HMRC internal manual

Company Taxation Manual

Close companies: capital payments to settlors: available income

The amount of available income is computed in accordance with ITTOIA/S635 and ITTOIA/S636.

The capital sum to be treated as income is to be grossed up for assessment purposes at the rate applicable to trusts in force for the year of assessment (ITTOIA/S640). Credit is given for notional tax at the appropriate rate. Since 6 April 2004, the appropriate rate is:

  • For income which arose to non-resident trustees from a source outside of the UK - 0%.

Where the above does not apply the capital payment is matched with earlier income before later income.

  • In respect of any part matched with income arising before 6 April 2004 the rate is 34%.
  • In respect of any part matched with income arising on or after 6 April 2004 the rate is 40%.

In practice, these computational matters will be of interest only to the office dealing with the settlor. Assessments will be made by that office under guidance from HMRC Trusts Bootle.