Commentary on Sections Overview Overview Section 486: How allowable expenses are to be set against trust rate income
1421.This section explains in step terms how allowable expenses are to be set against the trust rate income. It is based on sections 686(2AA) and 689B of ICTA.
1422.The section makes it explicit that it is the grossed up amount of expenses that is set against income charged at the special rates. (The meaning of “grossing up” is given in section 998.) See Change 88 in Annex 1.
1423.Before the grossing up process, Step 1 eliminates a proportion of expenses in the case of non-UK resident trustees in receipt of untaxed income (see section 487).
1424.Steps 2 to 6 require dividend, savings and other income to be considered in turn.
1425.Dividend income not within subsection (2) corresponds to foreign income within section 689B(2A) of ICTA.