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HMRC internal manual

International Manual

DT applications and claims: Non-resident beneficiaries of non-resident trusts

Claims by non-resident beneficiaries of non-resident discretionary trusts

When a beneficiary of a non-resident discretionary trust receives a distribution from the trust, the income loses its original character. However, a beneficiary who receives a distribution from a trust which includes taxed income from UK sources may be able to make a claim to relief on the income distributed to them, under Extra Statutory Concession (ESC) B18. This Concession includes the requirement that the trustees make returns of UKincome and meet any liability to UK tax before the claim can be considered. ESC/B18 allows us to ‘look through’ to the sources of income underlying the distribution to the beneficiary.

If the settlor of a discretionary trust is not excluded from benefit under a trust, it may not be possible for the beneficiary to take advantage of ESC/B18 (see INTM367640).

How to ‘look through’ to the underlying income of non-resident discretionary trust

You will need to ask CAR Residency in Bootle for a trust report. This will give the beneficiary’s share of each source of income underlying the beneficiary’s distribution. You can then apply the appropriate rates of double taxation relief to any source on which relief is available.

Confidentiality when advising a beneficiary or agent about a payment

A beneficiary of a discretionary trust has no rights against the income of the trust. Trustees may favour one potential beneficiary rather than another. Therefore, to provide information to a beneficiary about the income of a trust that you have used to calculate relief due under ESC/B18 will infringe the confidentiality of the trustees.

Because of this we cannot provide a breakdown of the underlying income comprising the repayment. The claimant (and their agent) only has a right to the final figure of the repayment we have calculated. However, if the beneficiary obtains the written permission of a trustee we can release information concerning the underlying trust income.

Sometimes a trustee will act as the nominated agent of the beneficiary. In that case you can release details of the computation to the trustee without seeking further written permission. If you are providing this information, you will need to show a full calculation. If the original apportionment of income was calculated using the computer program, you will need to make a full manual calculation (see INTM367890).