I have not seen the advice which this question refers to, but I suggest there are two distinct questions here.
- Do non-resident trustees qualify for a tax credit on UK dividends? Section 399 ITTOIA provides:
(1) This section applies if—
(a) a person’s income for a tax year includes a distribution of a company, and
(b) the person is non-UK resident.
(2) The person is treated as having paid income tax at the dividend ordinary rate on the amount or value of the distribution.
So it seems the answer should be yes. And why not!
- Does a UK resident life tenant obtain the benefit of the tax credit (including reclaiming the tax if appropriate)?
There is no provision to that effect. It is often the case that a life tenant should obtain credit for tax paid by the trustees, but that is not a statutory rule. In the present case it would not make sense for the beneficiary to have the tax credit so the answer should be no.
That would lead to a sensible result. But the point is not altogether easy. In Shirley v HMRC  UKFTT 1023 (TC) at .the Tribunal said:
it is not possible to ascertain a consistent and logical basis in the legislation for the taxation of dividends. ... There are no logically consistent principles (as it were) underpinning the taxation of dividends, against which the result of a literal interpretation can be compared—in order to reach a judgment that a literal interpretation results in an anomaly or absurdity.
There has subsequently been another round of reform, introduced in breach of the Tax Consultation Framework, but I think this gloomy assessment is still valid.
James Kessler QC
15 Old Square