Q re trust income payment

[jsmithalltaken]

Hi
I would be grateful for any wisdom on the following.

If the Trustees of a Jersey Trust resolve today to make payment out of the Income of the Trust to Mr Smith (UK resident non UK domiciled) but the actual payment is not made until say, June 2010. Which year's income will this affect 2009/10 0r 2010/11- (a) for the Trust and (b) for Mr Smith.

Many thanks

[maths]

The exercise of a discretion is effective at the time the decision to exercise is taken; the beneficiary in favour of whom the discretion is exercised can henceforth demand payment.

However, for UK tax purposes the beneficiary is taxable in the tax year of the payment and the trustees obligation to deduct income tax therefrom applies at the date of payment.

The above applies to UK resident discretionary trusts.

For a UK resident beneficiary of a non-UK resident discretionary trust again UK taxability on his part arises as and when payment is effected. The non-UK tax treatment is governed by the local law of the residence of the trustees.

[maths]

I have assumed that the non-UK domiciled beneficiary, if subject to remittance basis treatment, remits immediately.

[maths]

Having re-examined Chapter 7 Part 9 ITA 2007 a little more closely I am now of the view that for the trust and beneficiary the relevant date is the date when the trustees exercise their discretion; this is the date, as I indicated above, that a debt arises to the beneficiary and thus presumably is the date of "payment".

This approach would be consistent with the position with respect to "final" dividend payments (IRC v Potel).