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When a payment is made by trustees to a beneficiary, it is the character of the receipt in the hands of the beneficiary, not the source from which it comes, which determines whether it is income in his hands.

If it is an annual payment falling within ITTOIA 2005, ss 369–381 (Pt 4, Ch 2), the gross amount of the payment is part of the beneficiary's total income, whether it arises from trust income, capital, borrowed moneys or any other source.

In Brodie's Will Trustees¹ the trustees of a Will were directed to pay income from certain sources to the widow of the testator, and if in any year the income from those sources did not amount to £4,000, they were directed to raise and pay the deficiency out of capital.

It was held that the sums raised and paid out of capital formed part of the beneficiary's total income and were assessable to tax.

In the words of Finlay J (at 438):

'If certain sums of capital were simply handed over by the