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HMRC internal manual

Trusts, Settlements and Estates Manual

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HM Revenue & Customs
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Introduction to trusts: types of trust: interest in possession trust

There is no statutory definition of ‘interest in possession’.

A Board’s Press Notice dated 12 February 1976 indicates that an interest in possession ‘exists’ where the person having the interest has the immediate entitlement (subject to any prior claims by the trustees for expenses or other outgoings properly payable out of income) to any income produced…as the income arises….’

See CG36320 for a more detailed explanation. External customers can find this guidance at http://www.hmrc.gov.uk/manuals/cgmanual/CG36320.htm.

Sometimes we refer to interest in possession trusts as ‘non-discretionary’ trusts. The interest in possession beneficiary is sometimes referred to as having a ‘life interest’ or being the ‘life tenant’. See also TSEM6203.

The interest in possession beneficiary is taxable on the trust income after allowable trust management expenses. See TSEM3760+.