Income Tax (Trading and Other Income) Act 2005 section 633

Capital sums paid to settlor by trustees of settlement

Section 633 deals with how capital sums paid by the trustees of a settlement to the settlor are treated as the settlor's income for income tax purposes, matched against the settlement's available undistributed income over a period of up to 11 years.

• Where trustees pay a capital sum (directly or indirectly) to the settlor, it is treated as the settlor's income for that tax year to the extent it is covered by the settlement's available income up to the end of that year
• Any part of the capital sum not covered by available income in the year of payment can be matched against the settlement's available income in the following year, and so on for each subsequent year
• This matching process can continue for up to 10 years after the tax year in which the capital sum was paid, giving a maximum window of 11 years in total
• In each subsequent year, the amount already treated as the settlor's income in all earlier years is excluded before matching against that year's available income