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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income and gains: beneficiaries: payment from trust capital - exceptions to normal rule - annuity

The case of Jackson’s Trustees v CIR 25 TC 13 established that payments out of trust capital are income for tax purposes in the hands of a recipient where, by the terms of the relevant trust instrument regular payments out of capital are required to be made such that they can be treated as ‘annual payments’. This is comparatively rare, but the beneficiary is in effect given an annuity payable wholly out of capital.

ITA/S494 would not apply as the payments would not be made at discretion.