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HMRC internal manual

Trusts, Settlements and Estates Manual

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HM Revenue & Customs
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Ownership and income tax: income tax claims - general points

You may get claims that, while property is held in A’s name, it is owned by B, or that B is entitled to all the income. A common feature of such claims is that B is taxable on income at a lower rate than A, and/or has personal allowances to use. Some claims will be acceptable, others will not.

The taxpayer you are enquiring into would be A, who has potentially understated income. In some cases, B may have already paid tax on the income. In such a case, if A is ultimately taxable on the income, B may make an overpayment relief claim subject to the normal rules.

The arguments put forward about income tax may differ from those put forward about ownership of property for non-tax purposes. For non-tax purposes, often the claimant asserts that the property belongs to them, whereas for income tax purposes the (higher rate) taxpayer is likely to claim that the property (or income) does not belong to them. The cases that this guidance is concerned with involve two or more parties together alleging that a certain beneficial ownership of property or income exists. The parties are in agreement, but HMRC may disagree.

You will need to establish whether the alleged transfer of beneficial ownership of property or income ever took place, but note that the onus is on the taxpayer/s to prove that the beneficial ownership is different from the legal ownership (TSEM9140).

Examples of typical income tax claims are given at TSEM9410.