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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust management expenses: IIP trusts: IIP beneficiaries: measure of income: tax paid by trustees

The income tax paid by the trustees on that part of the income used for TMEs and other items excluded from the IIP beneficiary’s entitlement is not part of the beneficiary’s entitlement, because the income out of which the tax is paid is not part of the beneficiary’s entitlement. But the rest of the tax paid by trustees represents income to which the IIP beneficiary is entitled.

The beneficiary is given credit for the tax already paid by the trustees (or deducted at source) on the amount included in the beneficiary’s income for income tax purposes. That credit, i.e. tax already paid on the income to which the beneficiary is entitled, will necessarily be represented by the difference between the gross amount and the net amount as described in TSEM8345.