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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust management expenses: ‘properly chargeable to income’ in general trust law: HMRC v Peter Clay: ‘confer benefit’

The Court of Appeal decision in HMRC v Peter Clay clarifies the earlier decisions in Carver v Duncan and In re Bennett.

The earlier decisions established that for an expense to be charged to income it must be made to secure the income of the trust, that is, to get the income in.

HMRC v Peter Clay establishes that for an expense to be charged to income it must be incurred exclusively to confer benefit on the income beneficiaries. This can include not only expenses incurred in securing the income of the trust, but also in deciding how much to pay to the income beneficiaries, and getting the income to them.

The text in brackets at paragraph 40 of HMRC v Peter Clay, although obiter and in brackets, can be seen as supporting the need to distribute rather than accumulate the income for a related expense to be for the benefit of the income beneficiaries