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HMRC internal manual

Trusts, Settlements and Estates Manual

Non-resident trusts: trustees’ chargeability: Income Tax - UK source income: effect of ITA/S811 - details

In simple terms, the S811 cap on tax is the sum of any tax withheld from ‘disregarded income’ (S813) plus the tax that would be due on all non disregarded income if neither the ‘disregarded income’ were taken into account nor any personal allowances given.

Not all UK income is ‘disregarded income’, for example trustees of a non-resident trust will always be chargeable to Income Tax on UK property income.

Example

Year 2013-14

Income of non-resident trust:

UK bank interest = £1,000. Tax deducted at source = NIL

UK property income = £2,000. Tax deducted = NIL

The trust is within ITA/S479, and all the beneficiaries (income and capital) are not resident in the UK for the year 2013-14. The provisions of ITA/S811 apply to cap the liability to income tax on bank interest.

Income tax liability is limited to the sum of:

  1. (ITA/S811(4) the income tax deducted from bank interest (‘disregarded income’) -NIL and
  2. (ITA/S811(5) the income tax liability on property income - £2,000:

Income chargeable at the standard rate band (TSEM10240) is £1,000 @ 20% = £200.

Income chargeable at the trust rate = £1,000 @ 45% =£450

The Income Tax liability is £650 for the year 2013-14.