Postby LozaACCS » Wed Sep 30, 2015 8:57 am
I assume the trust is UK resident.
The income is taxable on the trustees at the Rate Applicable to Trusts (RAT).
In this case 1000 will be taxed at 20%, 4000 at 45%, so 2000 in total.
An income distribution to you will be treated as being made net of tax at 45%, so your R185 issued by the trustees will show a net payment of 3000, tax paid of 2455 and a gross payment of 5455
You enter the R185 gross figure on your tax return and claim the tax credit.
The problem is that the trustees have not paid enough IT to cover the income distribution to you so an additional liability arises under S497 ITA 2007.(assuming there were no balance on the tax pool B/Fwd), in this case the additional tax would be £455.
To avoid this the maximum net distribution would be 2444.
You also need to consider S811 ITA 2007 to decide whether it is worth claiming the PA or not.