TSEM8365 - Trust management expenses: IIP trusts: IIP beneficiaries: tax law: order of set-off: example

An IIP trust receives income in 2019-20: rental income £5,000 and bank interest £1,000 .Trustee pays TMEs properly chargeable to income of £250.

Trustee’s position

-	Rent	Interest
Gross income	£5,000	£1,000
Tax due	£1,000	£200
Net income	£4,000	£800

The trustee has to pay £1,000 tax on the rent and £200 on the bank interest. TMEs do not affect the trustee’s position.

Beneficiary’s position

-	-	Rent	-	Interest
Net income (as above)	-	£4,000	-	£800
Minus TMEs (set first against savings income)	-	-	-	(£250)
-	-	-	-	£550
grossed up	(@ 20%)	£5,000	(@20%)	£687.50