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HMRC internal manual

Trusts, Settlements and Estates Manual

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HM Revenue & Customs
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Trust management expenses: accumulation/discretionary trusts: relief against the special trust rates

The trustees of an accumulation/discretionary trust are chargeable at special trust rates on accumulated or discretionary income ITA/S479. From 6 April 2016, the rates are 38.1% for dividend type income, and 45% for other income (see TSEM3041). However, ITA/S484 provides for relief, at the difference between the special trust rates and other, lower rates, on income that is used to defray expenses of the trustees that are properly chargeable to income.

The effect of S484 is that so far as any of the trustees’ trust rate income has an amount set against it in accordance with S486 (see TSEM8250), income tax is charged on it at the rate or rates which would apply apart from the special rates for trustees’ income in ITA/S479 etc.

The relief given by ITA/S484 is not an optional relief that has to be claimed, but is part of the rules by which the trustee’s tax liability is to be calculated. S484(2) says that the allowable expenses ‘are to be set against the trustees’ trust rate income.