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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income: bank or building society interest

The interest is usually paid under deduction of tax. Trustees, whether they are individuals or companies are charged to income tax on their income. The law on ‘relevant investments’ for banks requires the deduction of tax from payment of interest to trustees - see ITA/S856(1)(d). Guidance on relevant investments is at chapter 2 of the TDSI Guidance Notes for Financial Institutions. External customer can find this guidance at

Beneficiaries are entitled to the income arising

The trustees can arrange to have the interest paid without deduction of tax. To do this they must provide the bank or building society with a declaration (R105) that all beneficiaries are not ordinarily resident in the UK.

Trustees who mandate the income direct to beneficiaries are not chargeable on the income see TSEM3763. If they do not mandate the income they include it on the Trust and Estate Tax Return.

Trust is within ITA S479

If the trust is within S479 the income is chargeable at the special trust rates TSEM3019 explains which trusts are within ITA/S479.

The trustees can claim to have the interest paid without deduction of tax if:

  • the trustees are not resident in the UK, (see TSEM1455 and TSEM1461), and
  • all the beneficiaries are not ordinarily resident in the UK (not resident if they are companies)

Trusts & Estates Nottingham deals with trusts that are non-resident (TSEM1450).