Collective investment schemes: unauthorised unit trusts: equalisation
Equalisation is a mechanism, which features in many unit trusts. Its purpose is toensure that the issue of further units or the redemption of existing units does not affectthe value of existing units. Further details regarding equalisation can be found inCTM48425 onwards and CG57705.
A unit holder who has purchased units during the period between two distribution dateswill receive a distribution made up of two amounts
- income which has accrued from the date of purchase, and
- capital which represents the return of the equalisation element.
The effect is that income is distributed to unit holders in proportion to the time ofownership of the units in the distribution period.
Returned equalisation is not part of the distribution for the purposes Part 15 ITA07 andis a capital receipt which, in the unit holders hands should be deducted from thecost of the units for taxation of chargeable gains purposes (see CG57705).