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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income and gains: the charge on trustees - standard rate band - deemed income

Various sums that are capital in trust law are deemed to be income for tax purposes and are also subject to the trust rate or dividend trust rate. See TSEM3200. The standard rate band applies to this deemed income as it does to actual income.

The result is that under ITA/S491, deemed income that falls within the first £1000 of income (£500 in the year 2005-06) is treated as follows:

  • profits or gains from the disposal of interests in certain offshore funds (TSEM3250)
  • certain deemed income receipts of trustees of employee share ownership trusts (TSEM3245)
  • guaranteed returns on disposals of futures or options (TSEM3235) are taxed at the basic rate from 2005-2006;
  • receipts under the Accrued Income Scheme (TSEM3300+)
  • profits from deeply discounted securities (TSEM3225)
  • gains from contracts for life insurance (TSEM3210) are taxed at the lower rate from 2005-06 to 2007-08 and at the basic rate from 2008-09.
  • stock dividends from UK companies (TSEM3270)
  • distributions arising from a company’s purchase of its own shares (TSEM3205) are taxed at the dividend ordinary rate from 2005-06.