Income Tax Act 2007 section 501

Non-UK resident beneficiaries

Section 501 restricts the proportion of trustee expenses that can be used to reduce a beneficiary's taxable income where part of that income is untaxed.

• Where trustee expenses would normally reduce a beneficiary's income for tax purposes, a proportion must be disallowed if some of that income is untaxed
• The disallowed proportion of expenses matches the proportion of the beneficiary's income that is untaxed
• When calculating the untaxed proportion, any income equal to income tax or foreign tax that the trustees are liable to pay on that income is excluded from both the total income and the untaxed income figures
• Foreign tax means any tax of a similar character to income tax imposed by the laws of a territory outside the United Kingdom