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HMRC internal manual

Trusts, Settlements and Estates Manual

From
HM Revenue & Customs
Updated
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Capital items that are income for tax purposes: Introduction

Various sums that are capital in trust law are deemed to be income for tax purposes. These are:

  1. Company purchase of its own shares (TSEM3205)
  2. Gains arising on contracts for life insurance (TSEM3210).
  3. Profits on the disposal of deeply discounted securities, where the trustees are resident in the UK (TSEM3225).
  4. Disposals of future and options (TSEM3235).
  5. Sales of foreign dividend coupons (TSEM3240).
  6. Chargeable events in respect of employee share ownership trusts (TSEM3245).
  7. Offshore income gains (TSEM3250).
  8. Lease premiums (TSEM3255).
  9. Transactions in deposit rights (TSEM3260),
  10. Certain transactions in land (TSEM3265).
  11. Accrued Income Scheme charges (TSEM3305+).

Up to 2005-2006 items 1 to 7 and 11 above are subject to the special trust rates (TSEM3011). Items 8 to 10 are not.

From 2006-2007 all 11 items are subject to the special trust rates. The relevant legislation can now be found in ITA/Sections 481 and 482.

See TSEM3018 for how this deemed income is affected by the standard rate band.

The special trust rates do not apply to deemed income of trustees of unauthorised unit trusts except in certain circumstances in respect of deeply discounted securities and gilt strips (see TSEM3225 and TSEM3230), offshore income gains (see TSEM3250) and Accrued Income Scheme charges (see TSEM3350).