Income Tax (Trading and Other Income) Act 2005 section 418

Relief where borrowers liable as settlors

Section 418 provides relief from double taxation where a borrower who is also a settlor has already been taxed under the settlements legislation (section 633) on sums relating to a loan or advance from settlement trustees, so that the same amount is not taxed again when the loan is released or written off.

• Relief applies where the borrower is or has been liable to income tax under section 633 (capital sums paid to settlor by trustees) in respect of the loan or advance
• If the total amount already taxed (under section 633 and previous charges under this Chapter) equals or exceeds the total amount released or written off, no further tax charge arises
• If the total amount released or written off exceeds the total already taxed, only the excess is subject to tax under this Chapter
• When calculating amounts previously charged under section 633, only the net figure is used — the grossing up at the trust rate required by section 640(1) is ignored

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