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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust management expenses: accumulation/discretionary trusts: trust deed

ITA/S484 provides for relief for trust management expenses that are ‘properly chargeable to income, ignoring the express terms of the settlement’. This is taken from the original wording in ICTA88/S686(2AA) ‘properly chargeable to income (or would be so chargeable but for any express provisions of the trust)’. The full meaning of this is explained in Carver v Duncan, when Lord Templeman examined the tax law question of the deductibility of expenses for the purpose of calculating income chargeable under what is now ITA/S479.

In that case, the trust deed allowed the trustees to pay certain expenses that were normally capital in trust law out of income. Lord Templeman said that although a settlor may provide that capital expenses shall be paid out of income, the settlor cannot alter the nature of those expenses.

So for ITA/S484 purposes, the provisions of the trust deed are ignored.