SolvedTSEM5665 | Trusts for particular purposes: discretionary payments taxed as employment income - 2010-2011 onwards - example
From HM Revenue & Customs · Trusts, Settlements and Estates Manual
The trustees must meet the conditions of the statute (TSEM5655).
This is how relief is calculated
| 2010-11 | Tax due | Total | 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.