Income Tax Act 2007 (c. 3)

Part 15 U.K. Deduction of income tax at source

Modifications etc. (not altering text)

C1 Pt. 15 modified (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 551(4), 1329(1) (with Pts. 1, 2, Sch. 2 para. 78)

Chapter 13 U.K. Unauthorised unit trusts

941 Deemed payments to unit holders and deemed deductions of income tax U.K.

(1) Subsections (2) and (3) apply if a unit holder in an unauthorised unit trust is treated under Chapter 10 of Part 4 of ITTOIA 2005 [F1 or Chapter 5 of Part 10 of CTA 2009] (distributions from unauthorised unit trusts if the trustees are UK resident) as having received income on a date.

(2) The trustees are treated as making on that date a payment to the unit holder representing the gross amount of the income (see section 548(2) of ITTOIA 2005 [F2 and section 973(2) of CTA 2009]).

(3) The trustees are also treated as deducting from that payment a sum representing income tax on the gross amount of the income at the basic rate for the tax year in which the payment is made.

F3 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) In this Chapter—

• “deemed deduction” means a deduction within subsection (3) F4 ... ,

• [F5 “deemed income” means the gross amount of income treated as received as mentioned in subsection (1),]

• “deemed payment” means a payment within subsection (2) F6 ... , and

• “the gross amount” means, in relation to a deemed payment, the amount of the payment before the deemed deduction is made from it.

Textual Amendments

F1 Words in s. 941(1) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 713(2) (with Sch. 2 Pts. 1, 2)

F2 Words in s. 941(2) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 713(3) (with Sch. 2 Pts. 1, 2)

F3 S. 941(4)(5) repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 713(4), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F4 Words in s. 941(6) repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 713(5)(a), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F5 Words in s. 941(6) inserted (8.4.2010 with effect in accordance with Sch. 13 para. 3 of the amending Act) by Finance Act 2010 (c. 13), Sch. 13 para. 1(2)

F6 Words in s. 941(6) repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 713(5)(b), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

942 Income tax to be collected from trustees U.K.

(1) This section applies if in a tax year the trustees of an unauthorised unit trust are treated as making deemed payments.

(2) Income tax is to be collected through trustees' self-assessment returns for the tax year (see Chapter 17).

(3) The amount of income tax to be collected (“the collectable amount”) is the amount equal to the sum of the deemed deductions from the deemed payments.

(4) But if the sum of the gross amounts of the deemed payments exceeds the trustees' modified net income for the tax year (see section 1025), the collectable amount is the amount calculated by taking the steps in subsection (5).

(5) The steps to be taken are as follows.

Step 1

Take the amount equal to the sum of the gross amounts of the deemed payments and reduce that amount by—

(a) the amount of the trustees' income pool as at the start of the tax year (see section 943), or

(b) if less, the amount by which the sum of the gross amounts of the deemed payments exceeds the trustees' modified net income.

Step 2

Apply the basic rate for the tax year to the result from Step 1.

[F7 (6) No relief under—

(a) sections 2 and 6 of TIOPA 2010 (double taxation arrangements: relief by agreement), or

(b) section 18(1)(b) and (2) of that Act (relief for foreign tax where no double taxation arrangements),

is allowed in relation to income tax to be collected by virtue of this section.]

Textual Amendments

F7 S. 942(6) inserted (8.4.2010 with effect in accordance with Sch. 13 para. 3 of the amending Act) by Finance Act 2010 (c. 13), Sch. 13 para. 1(3)

943 Calculation of trustees' income pool U.K.

(1) This is how the amount of the trustees' income pool as at the start of a tax year (“the current tax year”) is calculated.

The calculation to be used depends on which of the following cases applies.

But this needs to be read with subsections (2) and (3).

Case 1

This case applies if the trustees' modified net income for the previous tax year exceeded the sum of the gross amounts of the deemed payments treated as made by the trustees in that year.

The trustees' income pool as at the start of the current tax year is the sum of—

(a) the amount of the trustees' income pool as at the start of the previous tax year, and

(b) the amount by which the trustees' modified net income for the previous tax year exceeded the sum of the gross amounts of the deemed payments treated as made by the trustees in that year.

Case 2

This case applies if the trustees' modified net income for the previous tax year was less than the sum of the gross amounts of the deemed payments treated as made by the trustees in that year.

The trustees' income pool as at the start of the current tax year is—

(a) the amount of the trustees' income pool as at the start of the previous tax year, less

(b) the amount of the reduction made at Step 1 in section 942(5) for the purpose of calculating the collectable amount for the previous tax year.

Case 3

This case applies if the trustees' modified net income for the previous tax year equalled the sum of the gross amounts of the deemed payments treated as made by the trustees in that year.

The trustees' income pool as at the start of the current tax year is the same as the amount of the trustees' income pool as at the start of the previous tax year.

(2) If the trustees were non-UK resident for the previous tax year, references in subsection (1) to the previous tax year are to be read as references to the last tax year prior to the current tax year for which the trustees were UK resident.

(3) The income pool as at the start of the current tax year is nil if—

(a) the current tax year is the tax year during which the unauthorised unit trust is established, or

(b) the trustees have been UK resident for no tax year prior to the current tax year.

[F8 943A Treatment of cases involving double tax relief U.K.

(1) This section applies where—

(a) the trustees of an unauthorised unit trust are treated as making deemed payments to unit holders in a tax year (“the current tax year”),

(b) there is a reduction in the income pool in the current tax year, and

(c) the amount of the trustees' double tax relief pool as at the start of the current tax year is greater than zero.

(2) Section 848 (income tax deducted at source treated as income tax paid by recipient) does not apply to the foreign element of the deemed deduction treated as made from any of the deemed payments.

(3) Instead, for the purposes of the Tax Acts—

(a) the foreign element of the deemed deduction is treated as if it were tax payable under the law of a territory outside the United Kingdom with which there are not in force any arrangements under section 2(1) of TIOPA 2010 (double taxation relief by agreement), and

(b) the foreign element of the deemed income represented by the deemed payment is treated as if it were income that—

(i) arises in a territory of the kind mentioned in paragraph (a), and

(ii) is income by reference to which the tax treated under paragraph (a) as payable was computed.

(4) A reference in this Chapter to a reduction in the income pool in a tax year is to the amount (if any) by which—

(a) the amount of the income pool at the start of the tax year, exceeds

(b) the amount of the income pool at the start of the following tax year.

(5) See—

• section 943B for provision about references to the “foreign element” of a deemed deduction or deemed income, and

• section 943C for provision about the calculation of the trustees' double tax relief pool as at the beginning of a tax year.

Textual Amendments

F8 Ss. 943A-943D inserted (8.4.2010 with effect in accordance with Sch. 13 para. 3 of the amending Act) by Finance Act 2010 (c. 13), Sch. 13 para. 1(4) (with Sch. 13 para. 4)

943B The “foreign element” of a deemed deduction or deemed income U.K.

(1) References in this Chapter to the “foreign element” of—

(a) a deemed deduction treated as made in a tax year, or

(b) deemed income treated as received in a tax year,

are to the deemed deduction or deemed income multiplied by the relevant fraction.

(2) For this purpose “the relevant fraction” means—

where—

A is—

(a)

the reduction in the income pool in the tax year multiplied by the basic rate for the year, or

(b)

if lower, the amount of the trustees' double tax relief pool as at the start of the tax year;

B is the total of the deemed deductions treated as made in the tax year.

Textual Amendments

F8 Ss. 943A-943D inserted (8.4.2010 with effect in accordance with Sch. 13 para. 3 of the amending Act) by Finance Act 2010 (c. 13), Sch. 13 para. 1(4) (with Sch. 13 para. 4)

943C Calculation of trustees' double tax relief pool U.K.

(1) This is how the amount of the trustees' double tax relief pool as at the start of a tax year (“the current tax year”) is calculated.

(2) The trustees' double tax relief pool as at the start of the current tax year is—

where—

A is—

(a)

the amount of the trustees' double tax relief pool as at the start of the previous tax year, or

(b)

if the current tax year is the tax year during which the unauthorised unit trust is established, or the trustees have been UK resident for no tax year prior to the current tax year, nil;

B is the amount of the reduction, if any, in the liability of the trustees to income tax in the previous tax year under—

(a)

sections 2 and 6 of TIOPA 2010 (double taxation arrangements: relief by agreement), or

(b)

section 18(1)(b) and (2) of TIOPA 2010 (relief for foreign tax where no double taxation arrangements);

C is the sum of the foreign elements (if any) of deemed deductions from deemed payments treated as made in the previous tax year.

(3) If the trustees were non-UK resident for the previous tax year, references in subsection (2) to the previous tax year are to be read as references to the last tax year prior to the current tax year for which the trustees were UK resident.

Textual Amendments

F8 Ss. 943A-943D inserted (8.4.2010 with effect in accordance with Sch. 13 para. 3 of the amending Act) by Finance Act 2010 (c. 13), Sch. 13 para. 1(4) (with Sch. 13 para. 4)

943D Annual statements U.K.

(1) This section applies in relation to any tax year in which the trustees of an unauthorised unit trust are treated as making a deemed payment to a unit holder.

(2) The trustees must, as soon as reasonably practicable after the end of the tax year, give the unit holder a statement (an “annual statement”).

(3) The annual statement must include the following information in relation to each deemed payment treated as made by the trustees to the unit holder in the tax year—

(a) the date on which the deemed payment was treated as made,

(b) the gross amount of the deemed payment,

(c) the foreign element (if any) of the deemed income represented by the deemed payment,

(d) the deemed deduction made from the deemed payment, and

(e) the foreign element (if any) of that deemed deduction.

(4) The duties imposed by this section are enforceable by the unit holder.]

Textual Amendments

F8 Ss. 943A-943D inserted (8.4.2010 with effect in accordance with Sch. 13 para. 3 of the amending Act) by Finance Act 2010 (c. 13), Sch. 13 para. 1(4) (with Sch. 13 para. 4)