DT applications and claims: Non-resident beneficiaries of UK trusts
What happens if the total net distributed in a year exceeds the total net available for distribution (‘overdistribution’)
It the trustees have distributed more money in one year than is available to distribute from the income received in that year, you will need to analyse the balance from undistributed income arising in earlier years.
This is known as a ‘spreadback’ calculation. The income arising in earlier years can be analysed using the trust report program.
When spreading back we start with the most recent year in which income has been accumulated. If the trustees have over-distributed in earlier years we may have already made a spreadback calculation and used income accumulated in an earlier year. It is important that we do not use that accumulation again in the current spreadback. You cannot go back more than six years before the year in which the distribution was made. So if the trustees have made an excess distribution in 2003/04 you can only go back to 1998/99. But you only go back to accumulations made in that year if you have used up all the income accumulated in 2002/03, then 2001/02 and so on. The residence position of the beneficiary in the year(s) that the income was accumulated is not relevant.