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HMRC internal manual

International Manual

Double Taxation applications and claims: Applicants/claimants - Trusts: Baker and Garland Trusts

Unless a double taxation agreement (DTA) contains a subject to tax condition, relief will usually be dependent on the claimant being the beneficial owner of the income claimed.

Where trustees, or bodies of persons that can be taken to include trustees, are not specifically mentioned in a double taxation agreement (check the country specific pages to find out whether or not they are), and the trustees have no discretionary powers, we consider whether we can treat the trustees as being beneficial owners of the trust income according to whether the law of the country makes the trust ‘Baker’ or ‘Garland’. Baker and Garland are references to court cases from which we can infer beneficial ownership under UK law.

Baker and Garland only apply to trusts in which the beneficiaries have a right to the trust property. Therefore, where trustees have discretionary powers neither Baker nor Garland will apply. For guidance on claims by trustees with discretionary powers, see INTM339550.

Garland trusts

Where ‘Garland’ applies, you can, for the purposes of the double taxation agreement, treat the trustees as the beneficial owners of trust income as it arises and allow relief. This treatment is given because we consider that the beneficiary’s right to income from the trust is against the trustees, rather than in the underlying assets held in trust. However, you should still establish the identity and residence of the beneficiaries. If any beneficiary is in the UK you should notify their tax office.

Baker trusts

Where ‘Baker’ applies, you cannot treat the trustees as being beneficial owners of a trust’s income as it arises. Instead it is the beneficiaries who are the beneficial owners. Strictly, each beneficiary should claim in his or her own right. In practice it is acceptable to allow relief to the trustees, provided that you can be satisfied that the beneficiaries are entitled to relief under the same double taxation agreement as that under which the trustees have claimed. If this is not the case you may allow partial relief to the trustees by reference to the percentage of the interests that are relievable under the same DTA as the trustees. The beneficiaries who are not resident in the same country as the trustees will need to make their own claims against the income distributed to them.

A list of countries’ Garland or Baker status is held by Specialist Personal Tax, PT International Advisory.

If you have a claim by non-resident trustees, please also check the country specific pages for any guidance there.