Income Tax Act 2007

Trustees' expenses to be set against trustees' trust rate income

102 (1) This paragraph applies if the trustees of a settlement incur an allowable expense (see section 484) in a tax year prior to the tax year 2007-08.

(2) So far as the trustees have not paid the expense, the expense cannot, under Chapter 4 of Part 9, be set against the trustees' trust rate income for any tax year.

(3) So far as the expense is paid by the trustees in a tax year (“the relevant tax year”) after the tax year 2006-07, the expense is treated for the purposes of sections 484(1) and 485(1) as if it were incurred in the relevant tax year.

(4) So far as the expense is paid by the trustees in a tax year prior to the tax year 2007-08, section 485 applies in relation to the expense with the following modifications.

(5) It applies as if for subsection (3) there were substituted—

“(3) Condition A is—

(a) that section 686(2AA) of ICTA could not be applied in relation to the allowable expense so as to reduce the trustees' liability to tax for the tax year in which the trustees paid the expense, and

(b) that was the case only because the trustees' section 686 income for that year was insufficient or they had no section 686 income for that year.

• “Section 686 income” means income to which section 686 of ICTA applies.”

(6) It applies as if for subsection (4) there were substituted—

“(4) Condition B is that—

(a) for no tax year prior to the tax year 2007-08 has the allowable expense been used to reduce the trustees' liability to tax, and

(b) the allowable expense has not been set against the trustees' trust rate income for a tax year prior to the current tax year as a result of this section.”