Beneficiaries’ Foreign Income Schedule
Where a beneficiary has an entitlement to some of the non-discretionary foreign income of a trust, the totals are shown on form R185. Users requested a separate schedule analysing the foreign income between countries and the rate of tax applicable. Previously, this schedule had to be prepared entirely manually. We have updated this so that many of the figures for the schedule are provided by a schedule in Personal Tax.
The system works exactly as before:
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Foreign income is recorded in Personal Tax in the usual way.
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It is apportioned to non-discretionary beneficiaries on the Income not Liable to RAT screen. This is usually done by entering a percentage for each beneficiary and the system calculates the apportionment. But if it is necessary to override the calculated shares for a beneficiary, this is done by deleting the beneficiary’s Percentage at the top of the column and entering the shares manually underneath. This screen also allocates the trust management expenses to different categories of income.
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On saving the Income not Liable to RAT screen, the beneficiaries’ shares of the income are saved back to each beneficiary’s record, where they can be seen on the R185 tab. The figures shown on the R185 tab can also be manually overridden.
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The R185 forms are produced using the figures on each beneficiaries’ R185 tab.
To view the new schedule select View > Schedule from the Beneficiaries screen. It reconciles the beneficiaries’ shares of foreign income as shown on the Income not Liable to RAT screen to the figures appearing on the R185.
In the following example, the figures included in the Income not Liable to RAT are as follows, the figures that are reconciled are highlighted:
The Beneficiaries Foreign Income schedule might appear as follows.
Note: The Dividends figures agree with the Income not Liable to RAT. In this case, the Expenses figures also agree, but only because there is no UK income.
The Beneficiariary’s R185 tab is as follows. The R185 foreign income balances agree with the Beneficiaries Foreign Income schedule.
Schedule Columns
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Dividends The totals in this column agree with the balances on the Income not Liable to RAT screen for beneficiary Samantha Carter.
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Gross income and UK Tax These figures are calculated by grossing up the Dividends figures and may not agree exactly with the Income not Liable to RAT. Also the Income not Liable to RAT screen usually includes some UK income which is excluded from the Beneficiaries Foreign Income schedule.
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Share of Expenses The share of expenses allocated to each category of income should agree with the Income not Liable to RAT screen if there is no UK income, as in this case.
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Net income, R185 UK Tax, R185 Gross income The overall totals for each beneficiary should agree with the totals shown on the R185 tab as shown above. However this is only true, provided you do not manually override the figures on the beneficiary’s R185 tab.
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Foreign tax These figures are based on the original foreign tax figures, but reduced in relation to the Net income. So if the Net Income for an income type is reduced to zero by allocating management expenses, then the Foreign tax figure is also zero.
Note: The schedule is only available for trusts for 2016/17 onwards. It is not available for estates.
Note: The schedule only analyses “Foreign: Dividends, interest and other savings income” and “Foreign: Other income” by country. Other foreign income, such as income from a foreign property, is shown with a country of “Other foreign income”.
Note: If you manually override the beneficiaries’ shares of income on the Income not Liable to RAT screen, the totals shown on the Beneficiaries’ Foreign Income schedule agree with the manual overrides; however if the total figures are manually overridden on the beneficiary’s R185 tab then they do not agree, as the system cannot determine the type of income you intended to override.
Note: Foreign tax is shown before any limitation to the rates specified in the Double Taxation Agreements. So the total of foreign tax from the schedule cannot simply be entered as Foreign Tax Paid on the beneficiary’s R185 tab.
Note: If the beneficiary is a settlor then the figures shown may or may not be useful. The schedule calculates the figures in the same way for a settlor as for a beneficiary who is not a settlor.