ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL Unauthorised unit trusts (UUTs)
Under section 469(3) of ICTA (and section 548(2) of ITTOIA), trustees of UUTs are treated as making annual payments equal to the amount shown by the UUTs accounts as available for distribution or investment.
The trustees are chargeable with the income arising, and the charge to tax on that income is almost exclusively at the basic rate. But for a number of reasons (eg the availability to the trustees of capital allowances) the amount of the deemed annual payment need not be equal to the amount of the trust’s taxable income.
Trustees may therefore be treated (under section 348 of ICTA) as deducting and retaining income tax to the extent that the deemed annual payments do not exceed the taxable income. But it is also possible for trustees to be treated as making a payment not wholly out of taxable income, and thus to incur a liability under section 350 of ICTA. In practice such tax is collected through the UUT’s self assessment return. Where there is a liability under section 350 the rules in section 469(5A) to (5D) of ICTA give relief to the extent that, in previous tax years, taxable income has exceeded the deemed annual payments.