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.

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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