Income Tax (Trading and Other Income) Act 2005 section 646A

Trustees' expenses to be rateably apportioned

Section 646A requires that where a UK settlement has both charitable and non-charitable income, the trustees' expenses must be split proportionally between the two types of income rather than being set entirely against one.

• Where qualifying income under a UK settlement includes both charitable and non-charitable income, trustees' expenses must be apportioned rateably between the two categories
• Expenses that can be set against charitable income are capped at the proportion allocated to that charitable income after the rateable apportionment
• This cap applies both where expenses are set against income taxed at the special trust rates and where they reduce a beneficiary's income liable to income tax
• Charitable income means settlement income that would be treated as the settlor's income but for the fact that it is given to or arises to a charity