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HMRC internal manual

Trusts, Settlements and Estates Manual

HM Revenue & Customs
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Trust management expenses: IIP trusts: IIP beneficiaries: mandated income

Where trustees mandate income (see TSEM3762) and the beneficiary pays TMEs that are properly chargeable to income, such a beneficiary may set the TMEs against income chargeable at higher rate only. This practice of charging such income at no higher than the basic rate necessarily follows from the case law propositions that

  • there is no income tax relief at basic rate for income used to meet TMEs (see TSEM8310)
  • although an IIP beneficiary receives income mandated to him, to the extent that it is used to meet expenses properly borne by income it is not a part of his entitlement (see TSEM8325).