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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust management expenses: accumulation/discretionary trusts: grossing up

For income tax purposes, any expenses of the trustees payable out of income are understood to be paid out of income after it has suffered tax at the dividend ordinary rate or basic rate.

Hence the income out of which allowable TMEs are paid is grossed up at the appropriate rate or rates to establish the deductible amount for the purpose of setting against the special trust rates. See example in TSEM8255.