TSEM10335 - Non-resident trusts: settlor’s chargeability: Income Tax - capital sums paid to settlor

If capital sums are paid to the settlor or to his or her spouse or civil partner by the trustees of a non-resident trust, you need to consider:

• the application of the settlements legislation ITTOIA05/S633 and S641 (TSEM4400 to TSEM4405) where the settlor may be charged to tax on income of the trust that has not already been treated as his or her income under ITTOIA05/S624 and S629;
• the application of the Transfer of Assets Abroad legislation ITA07/S727 (INTM600660) where income payable to a person abroad (which includes trustees of a non-resident trust and any non-resident company underlying a trust) may be chargeable to tax on the settlor;
• the application of the Capital Gains Tax anti-avoidance legislation TCGA92/S87 (CG38570c ) where capital gains of the non-resident trust have not been charged to Capital Gains Tax on the trustees (TSEM10265), and the same gains have not already been attributed to the settlor under TCGA92/S86, then they may be attributed to the settlor as a result of the payment of the capital sum. In this case the settlor is also considered to be a ‘beneficiary’ of the trust.

A non-resident trust may give details of such capital sums on, for example, completed Tax Returns or form 50(FS) (TSEM10130).