Settlements legislation: certification under ITTOIA/S642(2)
ITTOIA/S624 and 629 treat income as that of the settlor. This can create an additional tax liability for the settlor. He or she is entitled to recover this tax from the trustees or other recipient. To do so the settlor can require a certificate showing such income and the tax paid. From 2006-07 the trustees of settlor-interested accumulation/discretionary settlements are no longer exempt from liability at the special trust rates (see TSEM3015). For tax years to 2009-10 the trustees of resident accumulation/discretionary trusts will usually be chargeable at the same rates as the settlor (although the settlor may be chargeable at lower rates if he or she is not a higher-rate taxpayer). As the settlor receives a credit for tax accounted for by the trustees he or she is unlikely to have an additional liability in these circumstances and so there should be fewer requests for certificates. For years from 2010-11 the trust rate is set at the same level as the additional rate so the tax paid by trustees will in more instances exceed that due from the settlor - see TSEM4550.
Where a certificate is requested, calculate the additional tax. Check the settlor has paid it. Prepare a certificate on plain notepaper. The wording is at TSEM4510. An Officer of Revenue and Customs must sign and date the certificate.
You need an original certificate and three copies.
- The original goes to the settlor or agent to send to the trustees or other person who may wish to keep it in support of the accounts.
- A copy goes to the settlor or agent for personal use.
- A copy goes in the settlor’s file.
- A copy goes in the trust file.
These certificates can be prepared and issued by either
- the settlor’s office or
- the Trusts & Estates office.