Trust Expenses: Income Or Capital?

IMPORTANT GUIDANCE FROM HMRC v TRUSTEES OF THE PETER CLAY DISCRETIONARY TRUST (2008)

A REPORT ON THE JUDGMENT OF THE COURT OF APPEAL OF ENGLAND AND WALES DELIVERED ON 19TH DECEMBER 2008

THE FACTS

A discretionary trust was established with four trustees: two were described by the family as the "non-executive" trustees, one was an "executive trustee" (an accountant), so described in contrast to the non-executive trustees, and the fourth was a family company. The non-executive trustees charged fixed fees. The executive trustee charged on a time basis. In 2000-2001 the trustees' fees were in the region of £47,000.00, of which approximately £42,000.00 was charged by the executive trustee and £5,000.00 by the non-executive trustees.