The worksheet breaks down the calculation that is required to compute the charge to tax at the trust rate. The worksheet is based on the Inland Revenue Tax Calculation Guide, found in the Trust and Estate Tax Return Guide.
Only the white boxes need to be completed (if they are applicable). The rest of the boxes are automatically calculated by IRIS.
The income of the trust first needs to be broken down and entered into the relevant boxes. Enter into the worksheet the total income for each section:
Income at the basic rate (except gains from UK and foreign life assurance companies & deemed income)
Income at the savings rate.
Income at the dividend rate.
Deemed income and gains from UK and foreign life assurance companies (with no notional tax)
Gains from UK and foreign life assurance companies (with notional tax)
Company purchase of shares.
Enter the total deductions applicable to the trust, i.e. interest on loans to pay inheritance tax, annuities and other annual payments, losses and so on. The deductions will then be set off against the various sources of income. This has to be done in a specific order and is computed automatically as follows:
Firstly against deemed income and gains from UK and foreign life assurance companies (no tax)
Against income taxed at the basic rate.
Against income taxed at the savings rate.
Against company purchase of shares.
Against gains from UK and foreign life assurance companies (with notional tax)
Finally against dividend income.
A company purchase of shares is not subject to the trust rate of tax and deemed income and gains from UK and foreign life assurance policies are always taxed at the trust rate (except Estate in Administration Trusts) so no further calculations are required in respect of this income.
Once the income after deductions has been computed, it is then necessary to deduct any income that is not liable to tax at the rate applicable to trusts. This information should have been entered on the Trust Tax Return at question 13.
In the 'basic rate' column, the total of boxes 13.5, 13.11 and 13.17 should be entered.
In the 'savings' column, the total of boxes 13.3, 13.9 and 13.15 should be entered.
In the 'dividend' column, the total of boxes 13.1, 13.7 and 13.13 should be entered.
It is also necessary to deduct non-qualifying distributions (from box 9.28) and exceptional deductions (from box 13.22) from the income. These amounts should be entered on the worksheet in the boxes provided.
This will then give the 'Income liable at the trust rate' amount.
It is from the 'Income liable at the trust rate' amount, that the trust management expenses are deducted. The trust management expenses should be entered on the form in the required box as should any entries from box 13.20 (expenses set against income not liable at the trust rate). These figures will then be netted off to determine the total trust management expenses allowable against the income.
A Standard Rate Band allowance of £500 has been introduced for the 2006 tax year this allowance, increasing to £1000 for the 2007 tax year. Below this level income received will be taxable at no more than the basic income tax rate (22%) savings rate (20%) and dividends rate (10%)
The management expenses are then grossed up at the rate that the income they are being set against is subject to, that is, if the management expenses are being set against basic rate income, then they would need to be grossed up by 22%.
The gross management expenses will be set off against the income in a specific order:
Firstly, from income which carries a notional or non-payable dividend rate tax credit of 10%, for example, scrip dividends and dividends from UK companies
Secondly from income taxable or carrying a tax credit at the lower rate of 20%, for example, interest from a UK bank or building society
Finally from income taxable at the basic rate of 22%
The net income is then taxed at 34% (25% for dividend income) (40% and 32.5% for 2005 onwards). From this the income tax paid on the net income at 22%, 20% and 10% will be deducted to result in the Charge for Income liable at the Trust Rate.
From 2007 the charge figure will no longer be shown separately on the tax computation; instead a detailed computation can be generated
Trust Management Expenses Worksheet - upto 2004
Trust Management Expenses Worksheet - 2005
Trust Management Expenses Worksheet - 2006
Trust Management Expenses data entry
Edit Return screen