Income Tax Act 2007 section 496B

Relief for trustees

Section 496B provides a mechanism for trustees of a settlement to claim a repayment of income tax where they have made discretionary employment income payments to beneficiaries during a tax year.

• Trustees of a UK-resident settlement who make discretionary employment income payments may claim a repayment of income tax for the relevant tax year, but only after that tax year has ended.
• The repayment is limited to the lower of two amounts: Amount A (the total employment income of beneficiaries from discretionary payments multiplied by the trust rate for the year) or Amount B (the trustees' available tax pool for the year, reduced by any income tax already treated as paid on other discretionary payments made in that year).
• A discretionary employment income payment is a payment made to a beneficiary out of income, in the exercise of a discretion by the trustees or another person, which counts as employment income of the beneficiary.
• The reduction to the tax pool when calculating Amount B cannot take the figure below nil, ensuring the repayment amount is never negative.