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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income and gains: beneficiaries: beneficiary receives trust income directly, the beneficiary's return

Sometimes there are instructions or arrangements for income to bypass the trustees of an interest in possession (IIP) trust.  If trust income passes directly or indirectly (for example, through an investment manager) to a beneficiary without going via the trustees the beneficiary needs to ensure that it is returned correctly on their tax return:

The beneficiary should return all income on the relevant pages of their tax return, in addition to their direct personal income.  For example, include:

  • dividends and interest on the SA100;
  • rental income on the SA105 (UK property);
  • foreign income on the SA106 (Foreign)

However, if income bypasses the trustees and the trust:

  • is settlor interested (TSEM4200 onwards), or
  • is not settlor interested but the trust income passes directly to the settlor’s relevant minor child (TSEM4300 onwards)

then the settlor includes the income on his or her personal return.  Other beneficiaries do not.

See TSEM3040 about the trustee’s position.

Income received via the trustees

The beneficiary should use the SA107 (Trusts etc) to return all other trust income, which will have passed through the trustees (with the exception of foreign income, which is returned on the SA106 (Foreign).