Trusts, Settlements and Estates Manual

TSEM5620 - Trusts for particular purposes: compensation under ESC A68 - example using dividend income - years to 2009-2010

The trustees must meet the conditions of the concession (TSEM5610).

This is how to calculate relief on dividend income.

Income and tax rates	Amount	Total
Tax pool brought forward	-	Nil
Dividend received	£90,000	-
Tax credit	£10,000	-
Gross income	£100,000	-
Tax due on standard rate band (10%)	£100	£100
Tax due at (dividend trust rate) (32.5%)	£32,175	£32,175
Less non-payable tax credit	-	£10,000
Income available for distribution	£67,725	-
Total tax pool	-	£22,275
Amount distributed subject to PAYE	£67,725	-

 

The compensation payable to trustees is the lesser of

Tax due	Amount	Total
tax at trust rate on the total payments which are treated as employment income	£67,725 @ 40% =	£27,090
tax which the trustees have available in the ‘tax pool’ above	-	£22,275
The compensation payable is therefore	-	£22,275