Part 9

Special rules about settlements and trustees
Chapter 7

Discretionary payments

Payments constituting income of beneficiary (other than employment income)

Discretionary payments by trustees
493
1
Sections 494 and 495 apply for income tax purposes if—
a
in a tax year the trustees of a settlement make an annual payment to a person (“the beneficiary”) in the exercise of a discretion (whether exercisable by the trustees or any other person),
b
the trustees are UK resident for the tax year, and
c
condition A or condition B is met.
2
Condition A is that what is paid to the beneficiary is, only because of the payment, income of the beneficiary for income tax or corporation tax purposes.
- “Income” does not include employment income.
3
Condition B is that the payment is treated for income tax purposes as the income of a settlor under section 629 of ITTOIA 2005 (income paid to relevant children of settlor).
- “Settlor” is to be read in accordance with section 620 of ITTOIA 2005.
4
The payment is referred to in sections 494 and 495 as “the discretionary payment”.
5
In this Chapter “payment” includes payment in money's worth.
S. 493 cross-heading inserted (with effect in accordance with art. 3(9) of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2010 (S.I. 2010/157), arts. 1, 3(2) (with art. 3(10))