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In simple terms, the s811 cap on tax is the sum of any tax withheld from ‘disregarded income� (s813) plus the tax that would be due on all non disregarded income if neither the ‘disregarded income� were taken into account nor any personal allowances given.

Not all UK income is ‘disregarded income�, for example trustees of a non-resident trust will always be chargeable to Income Tax on UK property income.

Example

Year 2013-14

Income of non-resident trust:

UK bank interest = £1,000. Tax deducted at source = NIL

UK property income = £2,000. Tax deducted = NIL

The trust is within ITA07/S479, and all the beneficiaries (income and capital) are not resident in the UK for the year 2013-14. The provisions of ITA07/S811 apply to cap the liability to income tax on bank interest.

Income tax liability is limited to the sum of:

1. (ITA07/S811(4) the income tax deducted from bank interest (‘disregarded income�) -NIL and
2. (ITA07/S811(5) the income tax liability on property income - £2,000:

Income chargeable at the standard rate band (TSEM10240) is £1,000 @ 20% = £200.

Income chargeable at the trust rate = £1,000 @ 45% =£450

The Income Tax liability is £650 for the year 2013-14.