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HMRC internal manual

Trusts, Settlements and Estates Manual

From
HM Revenue & Customs
Updated
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Trust management expenses: mixed trusts: part accumulation/discretionary and part IIP

In the case of a trust that has some income taxable on the trustees at the special trust rates, and some income taxable on a beneficiary with an interest in possession, the normal TMEs rules apply as appropriate to each part. Because of the difference in rules on allowable expenses (with the trust deed taking priority for interest in possession trusts but not for accumulation/discretionary trusts) where there is a mixed trust there may be differences with respect to the expenses that are allowable.

The amount of the allowable expenses relating to the income taxable at the special trust rates is set against that income. The amount of the allowable expenses relating to the income taxable on the IIP beneficiary reduces the beneficiary’s income.