Allowable expenses in a trust

Are property managment expenses allowable? What is the"Trustee Fee Allowance"?

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A new client is the life tenant of a trust which owns a single property (flat and shop) which is let to two diffrenet tenants. There are no other assets and no investments to be managed.

The trustee is a bank and they charge fees for running the trust which they say are not allowable for tax even though all they do is collect rent and deal with the insurance and the occasional repair. I think rental property managment fees should be allowable. Is this right?

They do however claim a deduction for what they call a "Trustee Fee Allowance" which is a figure that is very different from the amounts they actually charge. I can find no reference to a Trustee Fee Allowance in HMRC website. Is there such a thing?

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By Tax Dragon
15th Feb 2019 14:16

You need to distinguish your client and the trust of which s/he is the beneficiary.

Your client is taxable on the income s/he is due: rents less expenses (including trust management expenses). The trustees are taxable on rental profit calculated the same way as anyone else’s rental profit. They will have trustee expenses to pay from that net rent, for which they will obtain no tax relief.

You need to ask them, the trustees, what they mean by “Trustee Fee Allowance”.

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Red Leader
By Red Leader
15th Feb 2019 17:11

Take it from someone who has bad experience acting for trusts, if you don't know about them, really don't do them. It will come back to bite you.

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By penelope pitstop
18th Dec 2019 17:49

Tricky. Maybe cost of running the trust generally is not tax allowable.

But if the annual Bank bill showed the following. e.g.

Trust running costs £x
Rent collection costs £y
VAT on x & y £z

I would be tempted to allow £y plus vat on £y as a rental income cost at the trust level property income pages.

There used to be a very helpful grid in the Trust Tax Return Notes for allowable/disallowable Trust Management Expenses (TMEs).

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