We want to clarify how to use tax credits, attached to income paid or allocated to a beneficiary, when filing an Estate or trust return – IR6.
Once income is paid or allocated to the beneficiary, along with tax credits attached, it is the beneficiary's income and tax credit.
When a trustee will be paying a beneficiary's liability through the trust return, the trustee can include tax credits attached to income paid or allocated to the beneficiary in the calculation. However, the trustee cannot receive a refund of tax credits if they are attached to income paid or allocated to the beneficiary.
The beneficiary should always include income allocated, the tax credits attached to that income, and any further tax paid by the trust on their behalf in their income tax return. These tax credits should be shown in that return as offset against any tax payable or as an amount to be refunded to the beneficiary.