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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5142
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Again, You may remember, I've been dealing with my

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Hello again, You may remember, I've been dealing with my late father-in-law's accounts. You've helped me with several questions recently related to this. Thankfully, the process is nearly over, but I need a little help with completing the Trust tax returns
we discussed last time. My question relates to TME expenses, i.e. the things we can offset against the income my father-in-law's properties made from the time he died until the end of the probate process. In terms of income, we have rental income, and in terms
of expenses we have mortgage interest and insurance costs, which I'm sure are allowable. My question relates to allowable expenses a) Legal Costs My father-in-law had an ongoing legal dispute around one of his rental properties, and a few months after his
death, we had to settle a £30,000 legal bill which related directly to the renovation of this property (involving the architects who redesigned it some years beforehand). I've seen this - With this in
mind, do you think we can offset this legal bill against his property income for the tax year in question? b) Storage and Clearance Costs We have paid several thousands to help clear my father-in-law's properties, and have incurred ongoing storage costs. Are
these allowable expenses to offset against the rental income? Many thanks again for your help, it it very much appreciated, James
Hello and welcome to the site.
Thank you for requesting I help you with your question.
I am going to be away from my desk for the rest of the evening and will be happy to answer your question over the weekend.
Please let me know if this is acceptable.
Many thanks
Customer: replied 2 years ago.
Hello, of course, that's more than acceptable, and thanks, James
Customer: replied 2 years ago.
Hello,Apologies if I missed your reply over the weekend, did you have a chance to take a look at my question?Kind regards, James
James, I thank you for your patience. I am sorry for the delay in writing to you. a) Legal CostsLegal expenses incurred relating directly to the renovation of the property would be deemed capital expense and therefore not allowable as a deductible expense when looking at Trust Management Expenses. These costs don’t relate exclusively to the income beneficiaries. b) Storage and Clearance CostsIn managing a trust the trustees may incur expenses in the course of exercising their duties and powers. These expenses are quite separate from any expenses trustees may incur in, for example, carrying on a trade or property income business, which are deductible in arriving at the amount of profits from these sources. Expenses that are exclusively for the benefit of the income beneficiaries are chargeable to income and so are allowable. If you are able demonstrate these costs were necessary to enable the income beneficiaries to benefit from property income exclusively then there is a case to include them as TMEs. More information on this can be found in HMRC helpsheet 392 here I hope this ishelpful and answers your question.If you have any other questions, please ask me before you rate my service – I’ll be happy to respond. and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Hello, thanks again for the answer - this makes sense. The rules seem very strict, Kind regards, James
I thank you for accepting my answer.
Your reward of a generous bonus is greatly appreciated.
Best wishes.