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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income and gains: the charge on trustees - charge on accumulation or discretionary trusts

A trust is within ITA/S479 if:

  • the trustees have the power to accumulate income or make discretionary payments, and
  • for the years to 2005-06 the trust income is not treated as that of the settlor (TSEM4011).

The trustees pay tax at the trust rate. For 1999-2000 onwards they pay tax at the dividend trust rate on dividend type income. For 2006-07 onwards the exemption for settlor-interested settlements to the special trust rates no longer applies.

Tax paid at the special trust rates is taken into account in the trustees’ tax pool -TSEM3021 explains how.

Certain discretionary trusts are exempt from the charge at the special trust rates (TSEM3011). TSEM3025 has details.