Estate income and discretionary trust

Estate income and discretionary trust

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An estate has interest of £3000.  The only beneficiary of the estate is a discretionary trust. 

Am I correct in assuming that I need to issue a R185 of £3000 to the discretionary trust and the trust is then taxable on the interest of £3000 at the rate applicable to trust.

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By stuart46
28th Sep 2009 11:09

Yes after expenses
Is the £3,000 interest available after estate expenses which should be deducted from the distributable funds. The R185 should only include the income that is available to be paid to them by the estate.

The estate beneficiary is only assessable on the income in the tax year that the funds are paid to the beneficiary or when the estate is wound up and this may be in a different year to the estate.

There will be a 20% tax credit for the beneficiary which will then be set against the trust's liability at 40%. Management expenses may mean that the income is taxable at 20%.

The income can then be distributed to the trusts beneficiaries and another R185 prepared including a 40% tax credit.

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