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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust management expenses: IIP trusts: IIP beneficiaries: measure of income: net and gross amounts

Tax is charged on the beneficiary’s entitlement. The beneficiary receives

  • income net of tax and income expenses including TMEs (that receipt referred to below as ‘the net amount’),

but is actually entitled to

  • the untaxed amount of the income, net of income expenses including TMEs (that entitlement referred to below as ‘the gross amount’).

So the net amount is grossed up at the appropriate tax rates to arrive at the amount included in the beneficiary’s income for income tax purposes.


Trustees income is £1,000; allowable TMEs are £250, income tax due is £200 (£1,000 at 20%).

The ‘net amount’ is £550

The ‘gross amount’ is £687.50 (£550 grossed up x 100 ÷ 80).