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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust management expenses: IIP trusts: IIP beneficiaries: TMEs not a tax deduction

In an IIP trust, the income beneficiary is entitled to the income as it arises out of trust assets, with the exception of any part of that income that is properly paid away on trust expenses and some other items (see TSEM3762). TMEs are considered as part of establishing what net income the beneficiary is entitled to in law. That entitlement then provides the measure on which to tax the beneficiary. So, ‘allowable’ TMEs for an IIP beneficiary do not constitute a tax deduction or a tax relief, because they represent sums of money that the beneficiary was not entitled to in the first place.