What is the tax pool calculation in a Trust return (SA900)

What is a tax pool

Tax pools apply to discretionary trusts. Discretionary trusts are taxed at the trust rates of income tax and the trustees are responsible for paying the income tax on income received by the trust. When trustees make a discretionary payment of income to beneficiaries, the payment is treated by the beneficiary as if tax has already been deducted at the trust rate (currently 45%). This means the beneficiary could claim some or all of the tax back if they’re a non-taxpayer or pay tax at 20% or 40%. When trustees make a payment, they must have paid enough income tax (in the current or previous years) to cover the 45% ‘tax credit’ (tax treated as deducted).The tax pool keeps track of income tax the trustees pay. If the tax credit on payments to beneficiaries cannot be covered by the amount of tax recorded in the tax pool, the trustees must pay the difference. 

Where to find the tax pool in TaxCalc 

In order for a trust return to display a tax pool in TaxCalc, the trust should be taxed at the trust tax rates, for which the selection can be found in:

• SA900 > Getting Started > option 2 'Is the trust liable to income tax at either the rate applicable to trusts or the dividend trust rate, or both?'

The tax pool computation is automatically generated and can be found in:

• SA900 > Summaries > Tax pool Computation

The computation is automatically updated for any trust tax owed/paid by the trustees less any tax credits on payments made to beneficiaries, therefore keeping a record of the tax pool balance. Any tax owed on the tax pool is added to the main tax calculation for the year.