Trust income and gains: beneficiaries: beneficiary entitled to trust income - grossing up and credit for trustees' tax example
An interest in possession (IIP) trust where the Settlements legislation does not apply (see TSEM3765) receives income in 2009-2010: rental income £2,000 and bank interest £800 (basic rate tax of £200 has been deducted at source).
The trustee receives credit for the tax deducted at source from the bank interest (£200) so has to pay £220 tax.
|net income (as above)||1600||800||800|
|grossed up||(@ 20%)||2,000||(@20%)||1,000|
Beneficiary is a higher rate taxpayer
|tax at 40%||800||400|
|further tax to pay||400||200|
For an example involving TMEs, see TSEM8345-TSEM8350.