Section 111: When payment to beneficiary treated as arising from foreign source
240.This section lays down special rules for discretionary trusts. It is based on section 809 of ICTA.
241.A body of trustees is treated for income tax purposes as a separate person from the settlor and the beneficiaries of the trust. In certain circumstances, a payment by discretionary trustees is (a) treated as income in the hands of the recipient and (b) treated as received under deduction of income tax. See sections 493 and 494 of ITA. Broadly speaking, for income tax purposes such a payment effectively transfers income from the trustees to the recipient. And income tax suffered by the trustees on such income is credited to the recipient.
242.In such circumstances, this section enables credit relief to be transferred from the trustees to the recipient.