Taxation (International and Other Provisions) Act 2010 section 111

When payment to beneficiary treated as arising from foreign source

Section 111 sets out how beneficiaries of discretionary trusts can claim foreign tax credit relief when they receive payments that the trustees have made out of overseas income on which foreign tax was paid.

• When discretionary trustees make a payment to a beneficiary out of income that includes foreign-taxed income, the beneficiary may be able to claim the foreign tax credit relief that would otherwise belong to the trustees.
• The trustees must provide a certificate confirming that the payment includes taxed overseas income, specifying the amount and the foreign source of that income, and confirming that the income arose no earlier than six years before the end of the tax year in which the payment is made.
• The beneficiary can then claim that the payment, up to the certified amount, should be treated as their own income from the certified foreign source for the tax year in which they receive the payment, thereby entitling them to claim the corresponding foreign tax credit relief.
• "Taxed overseas income" means settlement income on which the trustees are entitled to claim credit under this Part for tax paid under the law of a territory outside the United Kingdom.