June Budget – Income tax trust adjustments
New rules for individuals who are taxed on the income of a trust they have set up (a settlor-interested trust) are to be introduced. In certain circumstances settlers may receive repayments of tax on trust income if they are liable to income tax at a lower rate than the trustees.
The new rules will require settlors to pay any such repayments of tax they receive to the trustees. The repayment will not constitute a chargeable transfer for inheritance tax purposes.
The new rules will take effect from 6 April 2010 and will be legislated for in the Finance Bill to be published after the summer recess.