Income Tax (Trading and Other Income) Act 2005 section 274B

Reduction for accumulated or discretionary trust income: entitlement

Section 274B sets out when trustees of a settlement with accumulated or discretionary income from a property business are entitled to a basic rate tax reduction in respect of finance costs disallowed under the restriction on residential property finance cost deductions.

• Trustees are entitled to relief for a tax year if they have one or more relievable amounts, each relating to a different property business — for example, one carried on directly and another through a partnership
• The relievable amount for each property business is the total of any current-year amount (finance costs disallowed in the current year) and any brought-forward amount (unused amounts from earlier years)
• A current-year amount arises where finance costs would have been deductible but for the residential property finance cost restriction, the trustees are taxable on a percentage of the profits, and that share constitutes accumulated or discretionary income
• The current-year amount equals the trustees' percentage share of the disallowed finance costs — so if trustees are liable on 60% of profits (for instance, because the property business is run in partnership), the current-year amount is 60% of the disallowed costs

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