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HMRC internal manual

Savings and Investment Manual

Accrued Income Scheme: special cases: unauthorised unit trusts

Unauthorised Unit Trusts

CTA10/S621(2) and ITA07/S504 provide that the income arising to the trustees of an unauthorised unit trust is regarded as income of the trustees and not the unit holders. Therefore, AIS allowances do not affect the measure of unit-holders’ income. The allowances are simply given to the trustee to set against the income he receives.

Years before 2007-08

Tax at the rate applicable to trusts should not be applied to accrued income charges where, and to the extent that, the unit trust treats accrued interest as income in its accounts. Such a result may be obtained by the unit trust adopting either a strict daily (‘full’) accruals basis under which income accrued up to the date of sale will have been taken to income or ‘clean price’ accounting under which the capital and income elements in a sale of interest bearing securities are separately identified and accounted for - in other words the income is stripped out.

2007-08 onwards

ITA07/S504 provides that the special tax rates for trustees’ income do not apply to unauthorised unit trusts, and do not therefore apply to AIS amounts arising in UUTs.

See SAIM6000 onwards for more on Unauthorised Unit Trusts.