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HMRC internal manual

Savings and Investment Manual

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HM Revenue & Customs
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Collective investment schemes: unauthorised unit trusts: liability of trustees: relief for excess payments

The ‘collectable amount’ where deemed payments exceed income

The basic rule on the amount of income tax to be collected from the trustees is set out in ITA07/S942 (3). This is that the tax to be collected through the trustees’ self-assessment tax return is the sum of the tax (the ‘deemed deductions’) on the ‘deemed payments’ (SAIM6050). This is the ‘collectable amount’.

As ITA07/S505 gives the trustees relief for the gross deemed payments to the unit holders, the tax on the deemed payments will normally be most of the tax the trustees will be required to pay.

If, however, the trustees’ modified unrelieved total income is less than the amount of payments made to unit holders, the deemed payments cannot be fully relieved and trustees’ may be left with a liability in respect of the tax to be deducted from the payments. ICTA88/S469 (5A) to (5C) was introduced from 1988-89 onwards to give relief for an ‘uncredited surplus’ in this situation, which could be deducted from the amount in which liability to tax was calculated.

ITA07/S942 (4) now allows, in calculating the ‘collectable amount’( where the sum of the gross amounts of the deemed payments exceed the trustees’ modified unrelieved total income) for the deduction of the ‘trustees’ income pool’ as at the start of the year or, if less, the amount by which the sum of the gross amounts of the deemed payments exceeds the trustees’ modified unrelieved total income from the gross deemed payments.(SAIM9060). The trustees’ income pool is calculated in accordance with ITA07/S943 and achieves the same effect as the previous legislation.

The trustees’ income pool

The ‘trustee’s income pool’ for the current year is calculated according to whether in the previous year modified unrelieved total income exceeded, or was less than, or equalled, the deemed payments. It is in effect a running total, taking one year with another, of the excess of modified unrelieved total income over deemed payments. If the deemed payments cannot be fully relieved because the trustees’ taxable income is insufficient in tax year, they can take account of any excess of modified unrelieved total income over deemed payments in earlier tax years.

No adjustment is made in respect of the excess of modified unrelieved total income over deemed payments in any year where the trustees are non-UK resident.

See SAIM6145 where the trustees have claimed double tax relief.