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PART 9 continued CHAPTER 8 continued
(1) This section applies if the beneficiary’s income is to be reduced for income tax purposes by expenses of the trustees.
(2) The beneficiary’s income is to be reduced in the following order—
first, reduce dividend income within subsection (3) (if any),
second, reduce dividend income not within that subsection (if any),
third, reduce savings income (if any), and
fourth, reduce other income (if any).
(3) Income is within this subsection so far as it is—
(a) chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc from UK resident companies),
(b) chargeable under Chapter 5 of that Part (stock dividends from UK resident companies), or
(c) chargeable under Chapter 6 of that Part (release of loan to participator in close company).
(4) If the trustees are liable for income tax charged on a component of the beneficiary’s income at a particular rate, then any reduction of that component is to be made in accordance with the steps set out in subsection (5).
(5) Here are the steps.
Step 1
Deduct from the component the amount of income tax charged on it at the particular rate for which the trustees are liable.
Step 2
Take the result from Step 1 and reduce it (but not below nil) by the amount of the trustees' expenses so far as they have not already been used to reduce other components of the beneficiary’s income.
Step 3
Take the result from Step 2 and gross it up by reference to the particular rate.
The result is the reduced amount of the component of the beneficiary’s income.
(1) This section applies for income tax purposes in relation to an unauthorised unit trust if the trustees are UK resident.
(2) If income arises to the trustees, the income is treated as the income of the trustees and not of the unit holders.
(3) If income tax on any part of the income would apart from this subsection be charged at the dividend ordinary rate or at the savings rate, income tax on that part of the income is charged at the basic rate instead.
(4) None of the following applies in relation to the income—
(a) section 479,
(b) section 397(1) of ITTOIA 2005 (tax credits for qualifying distributions),
(c) section 399(2) and (6) of ITTOIA 2005 (person not entitled to tax credit treated as having paid income tax), and
(d) section 400(2) and (3) of ITTOIA 2005 (person whose income includes non-qualifying distribution treated as having paid income tax).
(5) Sections 494 and 495 do not apply in relation to payments made by the trustees.
(1) This section applies if in a tax year the trustees of an unauthorised unit trust are treated as making a deemed payment.
(2) The trustees are entitled to a relief for the tax year equal to the gross amount of the payment.
(3) The relief is given by deducting that gross amount in calculating the trustees' net income for the tax year (see Step 2 of the calculation in section 23).
(4) But this is subject to subsections (5) to (7) and section 506.
(5) Relief is not to be given for the payment so far as it is ineligible for relief.
(6) For the purpose of determining the extent to which the payment is ineligible for relief (if at all) section 450 applies in relation to the payment as that section applies in relation to a payment to which section 449 applies.
(7) The total amount of the reliefs given under this section to the trustees for the tax year cannot be greater than the amount of the trustees' modified net income for the tax year (see section 1025).
(8) In this section and in section 506 “deemed payment” and “the gross amount” have the meanings given by section 941(6).
(1) This section applies if—
(a) interest payable to the trustees of an unauthorised unit trust in respect of securities (“the affected income”) is attributable to a tax year,
(b) because of section 733(1) of ICTA (dividend buying etc: persons entitled to exemptions), some part of the affected income is not exempt from income tax, and
(c) the trustees are treated as making deemed payments in the tax year.
(2) For the purposes of section 505(7) the trustees' modified net income for the tax year is reduced by the amount of the affected income.
(3) In this section “interest” and “securities” are to be read in accordance with section 731(9) of ICTA.
(1) This Chapter makes provision about income arising from heritage maintenance property comprised in a heritage maintenance settlement.
(2) In this Chapter—
“heritage body” means a body or charity of a kind mentioned in paragraph 3(1)(a)(ii) of Schedule 4 to IHTA 1984 (maintenance funds for historic buildings etc),
“heritage direction” means a direction under paragraph 1 of that Schedule,
“heritage maintenance property” means any property in respect of which a heritage direction has effect,
“heritage maintenance settlement” means a settlement which comprises heritage maintenance property, and
“property maintenance purpose” means any of the purposes mentioned in paragraph 3(1)(a)(i) of that Schedule.
(3) If a settlement comprises both heritage maintenance property and other property, the heritage maintenance property and the other property are treated as comprised in separate settlements for the purposes of Chapters 2 to 8 of this Part and the following provisions—
(a) sections 64 to 66 and sections 75 to 79 (trade loss relief against general income),
(b) sections 83 to 88 (carry-forward trade loss relief), and
(c) Chapter 5 of Part 5 of ITTOIA 2005.
(1) The trustees of a heritage maintenance settlement may elect for this section to have effect for a tax year.
(2) If an election under subsection (1) has effect for a tax year, the rules in subsections (3) and (4) apply.
(3) Income arising in the year from the heritage maintenance property comprised in the settlement, which would otherwise be treated as income of the settlor under Chapter 5 of Part 5 of ITTOIA 2005, is not to be so treated.
(4) Any sum applied out of the heritage maintenance property in the year for a property maintenance purpose, which would otherwise be treated for income tax purposes as the income of a person—
(a) because of the person’s interest in (or occupation of) the property in respect of which the sum is applied, or
(b) under section 633 of ITTOIA 2005 (capital sums paid to settlor by trustees of settlement),
is not to be so treated.
(5) An election under subsection (1) must be made on or before the first anniversary of the normal self-assessment filing date for the tax year to which it relates.
(1) If a change of circumstances arises during a tax year—
(a) the part of the year before the change and the part of the year after the change are to be treated as separate tax years for the purposes of section 508, this section and section 510, and
(b) separate elections under section 508(1) may be made for each part.
(2) A change of circumstances arises if conditions A and B are met.
(3) Condition A is that for any part of the tax year—
(a) a heritage direction has effect, and
(b) income arising from the heritage maintenance property comprised in the settlement is treated as income of the settlor under Chapter 5 of Part 5 of ITTOIA 2005.
(4) Condition B is that for the remaining part of the year one or both of the following paragraphs applies—
(a) no heritage direction has effect, and
(b) no income arising from property comprised in the settlement is treated as income of the settlor under Chapter 5 of Part 5 of ITTOIA 2005.
(1) This section applies if—
(a) income arises from the heritage maintenance property comprised in a heritage maintenance settlement in a tax year in respect of which no election is made under section 508,
(b) the income is treated under Chapter 5 of Part 5 of ITTOIA 2005 as income of the settlor, and
(c) a sum in excess of the income is applied for a property maintenance purpose in the year.
(2) Any such sum which is so applied in that year, which would otherwise be treated for income tax purposes as the income of a person—
(a) because of the person’s interest in (or occupation of) the property in respect of which the sum is applied, or
(b) under section 633 of ITTOIA 2005 (capital sums paid to settlor by trustees of settlement),
is not to be so treated.
(1) This section applies to income arising from heritage maintenance property if—
(a) the income is treated under Chapter 5 of Part 5 of ITTOIA 2005 as income of the settlor,
(b) the income is applied in reimbursing the settlor for expenditure incurred by the settlor for a property maintenance purpose, and
(c) the expenditure is deductible in calculating the profits of—
(i) a trade, or
(ii) a UK property business,
carried on by the settlor.
(2) Any such income—
(a) is not to be brought into account as a receipt in calculating the profits of that trade or business, and
(b) is not to be treated as income of the settlor otherwise than under Chapter 5 of Part 5 of ITTOIA 2005.
(1) Income tax is charged in respect of a heritage maintenance settlement on any of the occasions described in cases A to D, subject to sections 516 and 517.
(2) Case A is where any of the property comprised in the settlement (whether capital or income) is applied otherwise than—
(a) for a property maintenance purpose, or
(b) as respects income not so applied and not accumulated, for the benefit of a heritage body.
(3) Case B is where any of that property, on ceasing to be comprised in the settlement, devolves otherwise than on a heritage body.
(4) Case C is where the heritage direction ceases to have effect in respect of the settlement.
(5) Case D is where any of the property comprised in the settlement, on ceasing at any time to be comprised in the settlement—
(a) devolves on a heritage body, and
(b) at or before that time an interest under the settlement is or has been acquired for a consideration in money or money’s worth by that or another such body.
(6) For the purposes of subsection (5)(b) any acquisition from another such body is to be ignored.
(1) Tax is charged under section 512 on the whole of the income—
(a) which has arisen in the relevant period from the property comprised in the settlement, and
(b) which has not been applied (whether or not it has been first accumulated) for a property maintenance purpose or for the benefit of a heritage body.
(2) In this section “relevant period” means—
(a) if tax has become chargeable under section 512 in respect of the settlement on a previous occasion, the period since the last occasion, and
(b) in any other case, the period since the settlement took effect.
(3) Tax charged under section 512 is in addition to any tax otherwise chargeable.
(4) All the provisions of the Income Tax Acts relating to assessments and to the collection and recovery of income tax (so far as applicable) are to apply to that charge.
The persons liable for any tax charged under section 512 are the trustees of the settlement.
Tax is charged under section 512 at the rate found by—
(a) taking the higher rate for the tax year during which the charge arises, and
(b) reducing it by the trust rate for that year.
(1) This section applies if the whole of the property comprised in a settlement becomes comprised in another settlement because of a tax-free transfer.
(2) The occasion of charge under section 512, which would otherwise occur at the time of transfer, occurs when tax first becomes chargeable under that section in respect of any settlement comprising the transferred property (“the chargeable settlement”).
(3) For the purposes of section 513(1) as it applies to the chargeable settlement, the relevant period is adjusted so that it begins—
(a) on the occasion when tax last became chargeable under section 512 in respect of any previous settlement from which the property was transferred, or
(b) if there has been no such occasion, when such previous settlement (or the first of them) took effect.
(4) In this section “tax-free transfer” means a transfer of property from one settlement into another in either of the following cases—
(a) where paragraph 9(1) of Schedule 4 to IHTA 1984 provides (or, but for paragraph 9(4) of that Schedule, would provide) an exception from charge in respect of the property, or
(b) where, both immediately before and immediately after the transfer, the property is heritage maintenance property.
(1) Tax is not chargeable under section 512 in respect of income which is treated under section 624 or 629 of ITTOIA 2005 as income of the settlor.
(2) If such income arises in a tax year, any sums applied in the year—
(a) for a property maintenance purpose, or
(b) for the benefit of a heritage body,
are to be treated as paid first out of that income and, so far as there is any excess, out of income that does not fall within subsection (1).
Income Tax Act 2007