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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income and gains: beneficiaries: beneficiary entitled to trust income - deemed income

A beneficiary’s income is usually based on a share of income chargeable on the trustees. This does not apply to items that are capital in trust law and only deemed to be income for tax purposes (but see TSEM3769).

An example is premiums treated as rent (ITTOIA/S276). Sometimes a landlord requires a premium under a lease. If the lease does not exceed 50 years, all or part of the premium is treated for tax purposes as rent. This is in addition to any actual rent.

Deemed rent of the trustees is chargeable on them. But it is not regarded as the beneficiary’s income. This is because, under trust law, it is capital.