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HMRC internal manual

Trusts, Settlements and Estates Manual

Legal background to trusts & estates: trustee's remuneration

There is a general rule in equity that a trustee may not profit from his trust. He must administer the trust gratuitously. However a will or deed may authorise paying a trustee for his services.

Where, under a specific direction in a deed or will creating a trust or settlement, an annual sum is payable out of the income arising from the trust fund to a trustee as ’remuneration’ for services as trustee, the payment should be treated as an annual payment within the meaning of Section 348 ICTA1988. It should not be regarded as chargeable under Schedule E.

An annual payment as ‘remuneration’ to a trustee by virtue of an Order of the Court or a Deed of Appointment made subsequent to the deed or will creating the trust or settlement should normally also be treated as within Section 348 (see Hearn v Morgan 26TC478 and Pritchard v Lathom-Browne 26TC478). The ’remuneration’ should be regarded as earned income.

Where, however, a trustee is a professional person (for example, a practising solicitor) and is entitled under the deed or will to be paid all usual professional or other charges for any business done for the trust, any payment received by him in this capacity should be included in the computation of his liability under Schedule D (Jones v Wright 13TC221).

Tax case

Dale & others v CIR 34 TC 468

Hearn v Morgan 26TC478

Pritchard v Lathom-Browne 26TC478

Jones v Wright 13TC221