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CHARLES GOTHARD, LISA-JANE FAWCETT and SIMON JENNINGS look at the deductibility of trust expenses against income in the light of the Peter Clay decision
KEY POINTS
- Can trustees’ expenses be apportioned between income and capital?
- Treatment of executive and non-executive trustee fees.
- Investment managers’ fees must be treated with care.
- Fixed fees can be apportioned.
- Decision partially for the trustees and partially for HMRC.
The recent Court of Appeal judgment in HMRC v Trustees of the Peter Clay Discretionary Trust [2009] STC 469 provides much-needed clarification on an important issue affecting trustees of income producing discretionary trusts: to what extent can trust management expenses be deducted against income?
Surprisingly until this case there was no clear judicial authority regarding the attribution of expenses where they relate in part to income and in part to capital.
The case has far-reaching implications. Trustees need to be certain that they are applying the correct principles in...
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