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Trust expenses—overview

Trust expenses are the administrative expenses of a trust that the trustees incur in the course of their duties running the trust¹.

The term 'trust management expenses' is no longer used in the legislation² to avoid giving the impression that all expenses incurred in the course of managing a trust are necessarily allowable for tax purposes, although it is still used in HMRC's guidance³. While in trust law expenses can be charged to either trust income or capital, as appropriate, they must be properly chargeable to income (as opposed to capital) to be allowable for income tax purposes⁴.

Since an individual would not be able to offset such administrative expenses against their own income personally, these expenses cannot usually be set off against the income of:

1. Ìý

   •ÌýÌýÌýÌý a bare trust, as the beneficiary has an absolute right to the capital and income and is taxed as if they owned the trust property personally⁵

2. Ìý

   •ÌýÌýÌýÌý the settlor of a settlor-interested trust, as they are taxed