TSEM8365 - Trust management expenses: IIP trusts: IIP beneficiaries: tax law: order of set-off: example
An IIP trust receives income in 2010-11: rental income £1,000 and bank interest £800 (basic rate tax of £200 has been deducted at source). Trustee pays TMEs properly chargeable to income of £250.
Trustee's position
| Rent | Interest | |
| Gross income | £1,000 | £1,000 |
| Tax due | £200 | £200 |
| Net income | £800 | £800 |
The trustee receives credit for the tax deducted at source from the bank interest (£200) so has to pay £200 tax on the rent. TMEs do not affect the trustee's position.
Beneficiary's position
| Rent | interest | |||
| Net income (as above) | £800 | £800 | ||
| Minus TMEs (set first against savings income) | (£250) | |||
| £800 | £550 | |||
| grossed up | (@ 20%) | £1,000 | (@20%) | £687.50 |
