I was wondering if anyone has come across the situation of a settlor interested discretionary trust, which owns a UK rental property over which there is a mortgage?
The tax software (and HMRC’s software as confirmed to me by the provider) calculates the usual tax payable with the 50% deduction of the finance costs, and then deducts a non-refundable credit at basic rate for the other 50% of the finance costs.
However as it is settlor interested, my understanding from the notes on the R185 for a settlor is that this non-deductible 50% of finance costs should be passed out to the settlor who declares all the net income with the credit at BR or RAT, and then applies the non-refundable BR credit. This is the same as the treatment for estates and IIP’s.
I was wondering if anyone has come across this?
Gepp & Sons