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HMRC internal manual

Trusts, Settlements and Estates Manual

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HM Revenue & Customs
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Trust income and gains: the charge on trustees - amount of trust income chargeable

Trustees are chargeable at the basic rate on trust income without any deduction for trust management expenses.

Accumulation or discretionary trust

If the trust is within ITA/S479, the trustees are liable to tax at the special trust rates. These are the dividend trust rate in respect of dividend type income and the trust rate in respect of other income. TSEM3019 explains which trusts are within ITA/S479.

The amount of trust income chargeable at the special trust rates is the gross trust income, minus the total of:

  • income which before distribution ranks as the income, for tax purposes, of a person other than the trustees
  • for years to and including 2005-06 only income which is treated, for any purposes of the Taxes Act, as that of the settlor (from 6 April 2006 the exemption for settlor-interested settlements to the special trust rates no longer applies) and
  • allowable trust management expenses (TSEM8300).

Tax case

Reid’s Trustees v CIR 14 TC 512