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HMRC internal manual

Trusts, Settlements and Estates Manual

HM Revenue & Customs
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Settlements legislation: calculation of Income - ITTOIA/S623

ITTOIA/S623 allows the settlor ‘the same deductions and reliefs’ the settlor would have been entitled to had the settlor actually received the income. Thus reliefs which can only be set against a particular type of income, such as a credit under a DTA for foreign tax suffered by the trustees on foreign source income, is available to the settlor even though the charge on the settlor is under ITTOIA/Part 5 (‘Miscellaneous Income’).

Where the ‘income arising under a settlement’ is a net amount computed in accordance with the statutory rules (such as the profits of a trade or property business), ITTOIA/S623 does not allow losses made by the trustees to be used by the settlor. So, if the trustees make a loss from a property business the ‘income arising under a settlement’ is zero and there is nothing to attribute to the settlor - any losses remain at the trustee level. If no income has been attributed there can be no reliefs.