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HMRC internal manual

Trusts, Settlements and Estates Manual

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HM Revenue & Customs
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Trust management expenses: allowable expenses: specific items: introduction

The general TMEs principles about what is properly chargeable to income for tax purposes are set out in the preceding sections. The following section looks at specific items in more detail. It is subject to these overriding considerations:

For accumulation/discretionary trusts and interest in possession trusts, where there is a Court Order that specifies the incidence of an expense the terms of the Court Order take preference over the treatment described below. (See TSEM8020.) For example, if a Court Order directs a capital expense to be charged to income, then it can be an allowable TME for tax purposes.

For accumulation/discretionary trusts general trust law takes priority over the trust deed. (See TSEM8230). For example, if the trust deed directs or allows a capital expense to be charged to income, it is not an allowable TME for tax purposes.

For interest in possession beneficiaries the trust deed takes priority over general trust law. (See TSEM8340). For example, if the trust deed directs or allows a capital expense to be charged to income, then it can be an allowable TME for tax purposes. In the absence of such provisions, general trust law applies.

The guide also has to be seen in the context of the other types of trust - bare (see TSEM8405+), settlor-interested trust (see TSEM8505+) and mixed (see TSEM8605+).