TSEM8345 - Trust management expenses: IIP trusts: IIP beneficiaries: measure of income: net and gross amounts

Tax is charged on the beneficiary鈥檚 entitlement. The beneficiary receives

  • income net of tax and income expenses including TMEs (that receipt referred to below as 鈥榯he net amount鈥�),

but is actually entitled to

  • the untaxed amount of the income, net of income expenses including TMEs (that entitlement referred to below as 鈥榯he gross amount鈥�).

So the net amount is grossed up at the appropriate tax rates to arrive at the amount included in the beneficiary鈥檚 income for income tax purposes.

Example

Trustees income is 拢1,000; allowable TMEs are 拢250, income tax due is 拢200 (拢1,000 at 20%).

The 鈥榥et amount鈥� is 拢550

The 鈥榞ross amount鈥� is 拢687.50 (拢550 grossed up x 100 梅 80).