Part 9Special rules about settlements and trustees
Chapter 7Discretionary payments
F1Payments constituting income of beneficiary (other than employment income)
493Discretionary payments by trustees
(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.