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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust management expenses: allowable expenses: specific items: trustees’ fees: trustees other than the Public Trustee: general

The costs of dealing with matters such as determining the income distributions and the respective income needs of the beneficiaries are chargeable to income.

Apportionment can apply whether the trustees’ fee is fixed or not.

The Clay case made specific comments about trustees’ fees:

‘The fact that the fee is fixed does not of itself prevent the fee from being apportioned into two or more parts. The amount of each part is ascertained by applying the appropriate proportion to the whole. So, if it could be established (say, by the keeping of time records) that the non-executive trustees spent one half of their time addressing matters which were exclusively for the benefit of the income beneficiaries, there would be no difficulty in principle in making an attribution of one half of the fixed fee to income. The hurdle which faces the trustees’ claim to charge a part of the fixed fee against income does not arise because the fee is fixed: it arises because, in the absence of time records, it will be difficult for the trustees to establish whether any (and, if any, what proportion) of the time of the non-executive trustees was spent addressing matters which were exclusively for the benefit of income.’

‘In the administration of discretionary trusts of income the trustees may be expected to spend part of their time in addressing matters which are exclusively for the benefit of the income beneficiaries. By way of example, if the circumstances of individual beneficiaries are such as to require the trustees (in a proper exercise of their discretion) to make a distribution of income, they may be expected to spend time considering to whom and in what amounts such distribution should be made. The Special Commissioners needed to make a finding whether, in the present case, the non-executive trustees did devote part of their time addressing such matters; and, if so, what proportion of their time was devoted to that task. It is, I think, no answer to say that, in the absence of time records, determination of that proportion will, necessarily, be imprecise: a realistic estimate can be made.’

‘The onus of showing that some of the fees of the non-executive trustees related to advice for the exclusive benefit of income beneficiaries rests on the trustees.’