Trust taxation

The government's policy on trust taxation continues to be a source of much consternation.  With the recent announcement that the new, improved, super income tax rate of 50% (or should that be 51.11% ?) will apply to trust income from April 2010, it has already become tiresome having to explain over, and over, again, that this is not the true rate of income tax which will be suffered by the vast majority of trust beneficiaries. 

Given there will be only a relatively small number of trust beneficiaries with a personal income of £150,000, or more, it will, rather, only be the tiny minority who will suffer the 50% on their trust income when it is distributed  For every other beneficiary and, indeed, the trustees themselves, the rules serve only to cause a whole lot of unnecessary administration and disproportionate cost to be incurred in the accounting for tax that will have to be paid and then reclaimed (or, in many cases, reclaimed and then paid).

With HMRC's own survey (p.41) suggesting that the mean average annual income of a trust is only some £10,000, it has to be asked whether the government has completely lost the plot ?

And the answer is seemingly yes. From the Finance Bill debates, comes this gem from the normally more reliable Stephen Timms:

"Those for whom the lower rate is appropriate can reclaim tax; many do so already.  In the case of self assessment, that will happen automatically." 

Erm, what ?  Run that one by us again.