Finance (No. 2) Act 1997

16 (1) Section 689B of the Taxes Act 1988 (order in which expenses of trustees are to be set against income) shall be amended as follows.

(2) In subsection (1)—

(a) in paragraph (a) (set against income within subsection (2) or (3) before other income) after “subsection (2)” there shall be inserted “, (2A)”;

(b) in paragraph (b) (set against income within subsection (2) before subsection (3)) after “subsection (2)” there shall be inserted “or (2A)”; and

(c) at the end of paragraph (b) there shall be added “and

(c) as set against so much (if any) of any income as is income falling within subsection (2) below before being set against income falling within subsection (2A) below”.

(3) In subsection (2) (income against which expenses are to be first set)—

(a) before paragraph (a) there shall be inserted—

“(za) so much of the income of the trustees as is income chargeable under Schedule F;”; and

(b) after paragraph (a) there shall be inserted—

“(aa) so much of the income of the trustees as is a non-qualifying distribution, within the meaning of section 233(1B);”.

(4) After subsection (2) there shall be inserted—

“(2A) Income falls within this subsection if it is income to which section 1A applies by virtue of its being equivalent foreign income falling within subsection (3)(b) of that section and chargeable under Case V of Schedule D.”

(5) In subsection (3) (income to which section 1A applies but which does not fall within subsection (2) of s.689B) after “subsection (2)” there shall be inserted “or (2A)”.

(6) This paragraph has effect for the year 1999-00 and subsequent years of assessment.