HMRC internal manual

Trusts, Settlements and Estates Manual

TSEM5410 - Trusts for particular purposes: employment-related trusts -approved profit sharing schemes - taxation of trustees

The trustees are chargeable to Income Tax and Capital Gains Tax in the normal way. They are potentially subject to ITA/S479.

If the trustees invest funds in assets other than shares in the company, the income arising is chargeable at the rate applicable to trusts/dividend trust rate.

If dividends arise on shares in the company not appropriated to employees they are chargeable at the dividend trust rate. But if the shares are appropriated under the Scheme within 18 months of the trustees’ acquisition Section 186(11) ICTA 1988 takes the dividends out of ITA/S479. It is for the trustees to establish that Section 186(11) applies. When they do you should make any repayment. This exemption from ITA/S479 does not extend to any dividends arising on unappropriated shares that are subsequently sold by the trustees.