Section 493 — Income Tax Act 2007: Discretionary payments by trustees

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.