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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income and gains: beneficiaries: beneficiary receives trust income directly

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 to a beneficiary without going via the trustees the beneficiary needs to ensure that it is returned correctly on their tax return:

If this income has not been taxed at source, the beneficiary should return it on the relevant pages of their tax return.  For example, if the income is rent, include it on the SA105 (UK property).

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

However, if income passes directly to a beneficiary 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.