TSEM7910 - Deceased persons: Personal representatives' expenses: Properly chargeable to income

Expenses generally can be capital or income in nature but the only expenses that can be taken into account for income tax purposes are those that are properly chargeable to income.

The term ‘properly chargeable to income’ is not defined further by tax law and, to date, there has been no judicial consideration of the term in relation to administration periods and the calculation of residuary income. We need to consider then whether an expense is properly chargeable to income under general law.

In the context of estates, HMRC’s view is that ‘properly chargeable to income’ means properly chargeable to income on ordinary legal and accountancy principles as applicable to the administration of trust estates. The income expenses are those that relate to generating the income of the estate and they must actually have been paid out of income.

An expense that is incurred for both income and capital purposes, for example the preparation of tax returns incorporating both income tax and capital gains tax elements, should be apportioned on a reasonable basis.

TSEM7912-7914 contains guidance on specific items. If the guidance does not cover a particular expense, use the general principles set out above.