Case of the Month
Introduction
Our client is the beneficiary of a discretionary trust. With a discretionary trust all distributions received by beneficiaries are treated as though they have already been taxed at 45%. Therefore, beneficiaries who are not additional rate taxpayers should claim back the additional trust tax from HMRC.
Issue
Our client lives overseas, and they were not aware that their trust income was being taxed in the UK at 45%. They had received trust distributions for a number of years without knowing they were to complete form R40 and send this to HMRC to receive the refund.
How we solved it
Once our client found out they were able to reclaim the tax, they engaged us to analyse their circumstances and claim the additional tax they had paid. We completed calculations to understand their position and how much they were entitled to reclaim. As they were non-UK resident and did not have any other UK sourced income, their trust distributions were below the personal allowance and UK tax was not required. We completed form R40 for all of the relevant years and wrote to HMRC alongside the forms to explain the situation.
The outcome
Once HMRC had time to review our documents, they agreed to our conclusions and accepted our claim for the tax to be repaid back to our client. This was a brilliant outcome for our client as they had paid thousands in tax unknowingly over the years and they were able to reclaim this.
Next Steps
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