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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income and gains: beneficiaries: beneficiary entitled to trust income - trust that trades or has rental income - losses

The position here is similar to that for Capital Allowances, as described in TSEM3772. If the trustees have trading or rental losses that they can use against income in any year to reduce the trust’s taxable income, the interest in possession (IIP) beneficiary’s taxable income for that year is consequently reduced.