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HMRC internal manual

Trusts, Settlements and Estates Manual

Trusts for particular purposes: flat management companies - deduction of tax from interest received

Where a company receives interest on service charges it does so as a trustee because Section 42 LTA 1987 says the income is held on trust for the benefit of the tenants for the time being. The company is therefore receiving income in a representative capacity and it is not within the charge to corporation tax in respect of the income.

Trustees, whether they are individuals or companies are charged to income tax on their income. The law on ‘relevant investments’ for banks requires the deduction of tax from payments of interest to trustees - see ITA/S856(1)(d). Guidance on relevant investments is at chapter 2 of the TDSI Guidance Notes for Financial Institutions. (External customers can find this guidance at