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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income and gains: beneficiaries: beneficiary entitled to trust income - mandated income

Sometimes the trustees mandate trust income to a beneficiary. If the trustees mandate income to a beneficiary, it means that the beneficiary receives it and the trustees do not. So in such a case there is no statutory basis (see TSEM3761) for taxing the trustees as being in receipt of the income. The beneficiary both receives the income and is entitled to it.

The trustees exclude the income from the Trust and Estate Tax Return, even if it is untaxed. The beneficiary’s trust income is:

  • a share of the net taxed income as calculated on normal basis, and
  • the gross amount of untaxed income directly chargeable on him.

The beneficiary (or, where the settlor has retained an interest, the settlor) includes the income on his personal return.