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HMRC internal manual

Trusts, Settlements and Estates Manual

HM Revenue & Customs
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Trusts for particular purposes: discretionary payments taxed as employment income - 2010-2011 onwards - example

The trustees must meet the conditions of the statute (TSEM5655).

This is how relief is calculated

2010 - 2011     Tax Pool
Tax pool brought forward as reduced by compensation paid under ESC A68      
£ 1,000        
  Interest received   £100,000  
  Tax due at standard rate and trust rate (20% and 50%) before relief under ITA/S496B   £ 49,700 £49,700
  Amount of tax pool before relief under ITA/S496B     £50,700
  Amount distributed subject to PAYE   £ 50,000  
  Relief given*     £25,000
  Tax pool carried forward     £25,7000
  *The relief due to trustees is the lesser of      
  * Tax at trust rate, on the total payments in the year which are treated as employment income £50,000 @ 50% =   £25,000
  * Tax which the trustees have available in the ‘tax pool’ above     £50,700
  The relief given is therefore     £25,000


If the claim for relief is made in the tax return for 2010-2011 the tax due for the year is £25,700.


If the claim is made outside the return the tax due for 2010-2011 is £50,700 of which £25,000 will be repaid on the making of a valid claim.