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HMRC internal manual

Trusts, Settlements and Estates Manual

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.

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 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