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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust management expenses: allowable expenses: specific items: insurance premiums for trust assets

There may be cases where insurance premiums are payable in respect of trust property used or occupied by a beneficiary where the terms of the beneficiary’s use or occupation include their being obliged to meet the insurance premium. In that case the payment of the insurance premiums by the trustees would be a distribution and not an expense at all, and so would not be an allowable TME. Where the insurance premiums constitute expenses, the following applies.

If the premiums for insuring trust assets have been deducted from any trading or rental income of the trustees they do not fall to be considered as TMEs. The trust can have relief for a particular expense only once.

If the trustees have insured trust assets outside of a trade, the premiums should generally be regarded as payable out of capital as a matter of trust law, because what is insured is trust capital. These costs are therefore generally not allowable TMEs.

As an exception to this, TMEs are allowable where:

  • the premiums relate to buildings insurance for a property; and
  • the lease contains an obligation to insure the property; and
  • the trustees are lessees of the property, and
  • the leasehold property is occupied by beneficiaries under the terms of the trust,
  • and neither the beneficiaries nor any tenants (as the case may be) are under a legal obligation to meet the insurance premium.