DT Agreements: Ireland - Income from a UK source paid to a resident of Ireland
Claims by trustees in Ireland
Claims by Irish Trusts
You may receive claims from trustees of Irish discretionary trusts, or you may be asked for a residence ruling on an Irish discretionary trust by CAR Residency (non-resident trusts) in Bootle.
Article 4(3) (Fiscal Residence) of the convention makes reference to ‘a person other than an individual’. Trustees act as a body of persons and so are persons other than an individual for the purposes of the article, and we therefore refer to the criteria in Article 4(3) to determine whether trustees of an Irish trust are resident in the Ireland for the purposes of the convention.
This is only relevant if trustees have discretionary powers. Where beneficiaries have a life interest in an Irish trust they are the beneficial owners of the income, because such Irish trusts are considered to be ‘Baker’ trusts - see INTM340030
When you need to determine the place of effective management of an Irish trust
Under the treaty with Ireland, the residence position of trustees is determined by the ‘place of effective management’ in accordance with article 4(3) of the treaty. The reason for this is that trustees act as a body of persons and so are ‘a person other than an individual’ for the purposes of article 4.
So if you have a claim from a trust under the treaty with Ireland and find that the trustees are resident in more than one country, you will need to establish the trust’s place of effective management.
You should ask Technical Advice Group to confirm any judgement you make on the residence of a group of individual trustees.
Criteria for determining the place of effective management of an Irish trust
You need to find out who generally controls and supervises the work of administering the trust. By administering the trust we mean: keeping accounts, conducting correspondence, arranging the trustees’ meetings and putting the trustees’ decisions into effect.
If the trustees are all individuals
You will need to find out which of the trustees is responsible for the tasks outlined above, and the dates and locations of all trustees’ meetings held during the period of the claim.
If a professional body acts as a trustee
You can accept that the place of business of the professional body is the place of effective management of the trust.
For this purpose the professional body is appointed by the testator or settlor of the trust, and does not include:
* An individual who is a solicitor or an accountant * An agent or an attorney administrator appointed by the trustees
Residence of a professional body
If a professional body acting as a trustee is a branch in Ireland of a UK bank or similar institution, it is considered to be in Ireland for the purposes of Article 4(3). A UK branch of an Irish bank would however not be considered to be in Ireland.
Requests from CAR (Non-resident trusts) for advice on residence of trustees for the purposes of the convention
CAR (Non-resident trusts) in Bootle may need to ask for advice on the residence position of trustees for the purposes of Article 4(3) in cases where trustees are resident in more than one country. This is in order to determine whether trustees making income tax returns to non-resident trusts (Bootle) can be exempted from charges to income tax on sources of income relievable under the convention.
Because of this you will not have the evidence of a formal claim to work from. You will need to make a judgement from the information available. If you do not have sufficient information, advise the likely position and state what further information you would need to reach a firm opinion. You should not engage in correspondence with the trustees or with their representatives to establish where they are resident.
It may be that a trust’s only source of income in the United Kingdom is dividends. Although the dividend article of the convention does not allow relief on tax credit, it does allow relief on income tax. Non-resident trustees are chargeable to income tax on dividends under ITA07/S479, which is why the residence position of the trustees is important.
Trustees place of effective management is in the UK
If you refuse a claim from trustees under the convention because their place of effective management is in the United Kingdom, you will need to advise CAR (Non-resident trusts), who will act as GCD for the trust.
You will also need to write to the Revenue Commissioners of Ireland, and INTM333940 and following will help you to do so.
Examination procedure for claims by trustees
When you receive a claim from Irish trustees, you should check the papers to see if you have details of the type of trust and the place of effective management of the trustees.
If it has been established that the trustees are entitled to claim, you should continue with the claim under normal examination procedures. If it is some time since the information was provided, you may need to open an enquiry to establish the identity and residence of the current trustees and beneficiaries.
If the claim is a first claim, or if previous claims have been processed without the correct information about the trustees, you will need to establish that the trustees are entitled to claim. To do this you will need to make an enquiry into the claim and ask for the completion of a form 4467(trustee)/FD.
The completed form will give you information about the residence position of the trustees and of the beneficiaries, and the nature of the beneficiaries’ interest in the trust.
- If all of the trustees and beneficiaries are in Ireland, you can pay the claim, subject to normal examination requirements
- If the trust is not discretionary [or contingent] you will need to treat claim by reference to the instructions for Baker trusts INTM340030.
- If the trust is discretionary, you will need to establish whether the trustees are resident in Ireland for the purposes of Article 4(3) of the convention - see Claims by Irish Trusts above. If they are, you can allow relief, subject to normal examination requirements.
If you need to make further enquiries to establish the place of effective management of the trust, ask for the details of the administration of the trust listed at INTM353605. If the answers given satisfy you that the place of effective management of the trust is in Ireland, you can allow relief subject to normal examination requirements.
Tax exempt Irish trusts
You will usually meet this type of claimant in the form of a unit trust which has been set up for the benefit of tax exempt Irish bodies, and which admits only such bodies as members. And this type of claimant will almost invariably be claiming relief under Article 14A of the convention - see INTM353570.
Where all the members of the unit trust would be entitled to benefit under Article 14A of the convention in their own right, relief can be allowed in respect of rentals paid to the unit trust.
But before allowing relief it may be necessary to obtain assurances that participation in the unit trust is and will continue to be restricted to those entitled to relief under Article 14A.
So you should refer to Technical Advice Group any claims/applications/enquiries about relief for unit trusts under Article 14A before processing them.
Irish unit trusts
You are unlikely now to see a claim by an Irish unit trust that is not covered by the guidance at Tax exempt Irish trusts above. But if you do, please refer to Technical Advice Group before taking any action.
Claims by Irish unit trusts have usually been processed on the basis that the unit trust makes the claim on behalf of the unit holders, and it may be necessary to make enquiries to make sure that this is appropriate in any particular case.