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HMRC internal manual

Trusts, Settlements and Estates Manual

HM Revenue & Customs
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Trust management expenses: allowable expenses: specific items: accountancy: audit of trust accounts

Section 22(4) Trustee Act 1925 empowers trustees to commission an audit of trust accounts in specified circumstances. Where an audit is undertaken under the Section 22(4) power, by the same provision trustees have discretion as to the final incidence of such expenses between income and capital. In this case the trustees’ exercise of their discretion will be taken as conclusive to determine the incidence of the expenses, and what the trustees charge to income will be allowed as a TME. If the trustees do not positively exercise their discretion then Section 22(4) provides, in effect, that the expenses associated with auditing capital are to be borne by capital, and those associated with auditing income to be borne by income. In such a case only the latter are allowable TMEs.

In circumstances other than those envisaged by Section 22(4) Trustee Act 1925 trustees may be empowered by the trust deed to undertake audits. The normal rules about trust deeds and TMEs apply - see TSEM8230 and TSEM8340.