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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust management expenses: introduction: expenses vs distributions

To be an allowable TME, an item must be an expense. Distributions are not expenses and so are never allowable TMEs.

A distribution is a payment out of the trust that is either itself a gift made directly to the beneficiary, or a payment to a third party that procures a benefit for a beneficiary. Distributions may be referred to as ‘capital’ or ‘income’, depending on which fund they are to be paid out of.

Examples of distributions are:

  • payment of cash or a grant to a beneficiary
  • the costs of procuring a benefit in kind for a beneficiary, such as the payment of a beneficiary’s utility bills
  • the cost of providing gifts, medical treatment, support or entertainment to beneficiaries.