Income Tax (Trading and Other Income) Act 2005 section 635

Amount of available income

Section 635 explains how to calculate the amount of income available in a settlement for the purposes of treating capital sums paid to a settlor as the settlor's income under section 633.

• Available income starts with total undistributed unprotected income arising under the settlement in the current and all previous tax years.
• Deductions are made for amounts already matched against capital sums under section 633 in earlier years, and for income already taxed on the settlor under the settlor-interested or parental settlement rules (sections 624 and 629).
• A further deduction is made for an amount equal to tax at the trust rate on the undistributed unprotected income (after excluding income already taxed on the settlor under sections 624 or 629).
• Certain protected foreign-source income and transitional trust income is excluded from the available income calculation, and the rules for computing undistributed income are set out in sections 636 and 637.