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Readers' forum : UK/US trust income

05 April 2016
Issue: 4544 / Categories: Forum & Feedback

Guidance sought on a UK/US tax issue relating to interest income.

My client is a UK-resident US citizen and a remittance basis user. She is the settlor (or grantor) of a US trust of which she is also a beneficiary. The trust lent funds to a UK company and a claim for business investment relief will be made on this loan. I am not clear on some aspects of the taxation of the interest that will arise from the loan. The interest is a UK source and it would therefore appear that it is directly taxable on my client. This is because the trust is settlor-interested and the remittance basis would not apply to UK source income. Is this correct?

I also have the following questions.

First the company has an obligation to deduct basic rate income tax from the interest because the lender is abroad. Under the double tax treaty between the UK and the US it would...

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