Finance Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 14 — Unauthorised unit trusts
128


where—
A is—
(a)
the reduction in the income pool in the tax year
multiplied by the basic rate for the year, or
(b)
if lower, the amount of the trustees’ double tax relief
5
pool as at the start of the tax year;
B is the total of the deemed deductions treated as made in the
tax year.
943C
Calculation of trustees’ double tax relief pool
(1)
This is how the amount of the trustees’ double tax relief pool as at the
10
start of a tax year (“the current tax year”) is calculated.
(2)
The trustees’ double tax relief pool as at the start of the current tax
year is—

where—
A is—
15
(a)
the amount of the trustees’ double tax relief pool as at
the start of the previous tax year, or
(b)
if the current tax year is the tax year during which the
unauthorised unit trust is established, or the trustees
have been UK resident for no tax year prior to the
20
current tax year, nil;
B is the amount of the reduction, if any, in the liability of the
trustees to income tax in the previous tax year under—
(a)
sections 2 and 6 of TIOPA 2010 (double taxation
arrangements: relief by agreement), or
25
(b)
section 18(1)(b) and (2) of TIOPA 2010 (relief for
foreign tax where no double taxation arrangements);
C is the sum of the foreign elements (if any) of deemed
deductions from deemed payments treated as made in the
previous tax year.
30
(3)
If the trustees were non-UK resident for the previous tax year,
references in subsection (2) to the previous tax year are to be read as
references to the last tax year prior to the current tax year for which
the trustees were UK resident.
943D
Annual statements
35
(1)
This section applies in relation to any tax year in which the trustees
of an unauthorised unit trust are treated as making a deemed
payment to a unit holder.
(2)
The trustees must, as soon as reasonably practicable after the end of
the tax year, give the unit holder a statement (an “annual
40
statement”).
(3)
The annual statement must include the following information in
relation to each deemed payment treated as made by the trustees to
the unit holder in the tax year—
(a)
the date on which the deemed payment was treated as made,
45
(b)
the gross amount of the deemed payment,

Finance Bill
Schedule 14 — Unauthorised unit trusts
129

(c)
the foreign element (if any) of the deemed income
represented by the deemed payment,
(d)
the deemed deduction made from the deemed payment, and
(e)
the foreign element (if any) of that deemed deduction.
(4)
The duties imposed by this section are enforceable by the unit
5
holder.”
Consequential amendments
2     (1)
In section 550 of ITTOIA 2005 (distributions from unauthorised unit trusts:
income tax treated as paid), after “is” insert “, subject to section 943A of that
Act (treatment of cases involving double tax relief),”.
10
      (2)
In section 848 of ITA 2007 (income tax deducted at source treated as income
tax paid by the recipient), at the end insert—
“(4)
In relation to income tax deducted at source under section 941
(unauthorised unit trusts), this section is subject to section 943A
(treatment of cases involving double tax relief).”
15
      (3)
In Schedule 4 to that Act (index of defined expressions), insert at the
appropriate places—

“deemed income (in Chapter 13 of Part 15)
section 941(6)”

“foreign element (in Chapter 13 of Part 15)
section 943B”.

      (4)
In section 971 of CTA 2009 (distributions from unauthorised unit trusts:
20
overview of Chapter), in subsection (2)(a), after “is” insert “, subject to
section 943A of that Act (treatment of cases involving double tax relief),”.
Commencement
3
The amendments made by this Schedule have effect in relation to payments
treated under section 941(2) of ITA 2007 as made on or after 21 October 2009.
25
Transitional provision: opening value of trustees’ double tax relief pool
4     (1)
This paragraph applies, and section 943C of ITA 2007 does not apply, in
relation to the determination of the amount of the trustees’ double tax relief
pool as at the start of the tax year 2009-10.
      (2)
That amount is—
30
(a)
if amounts A and B are both greater than £20,000, the lower of those
amounts, and
(b)
in any other case, nil.
      (3)
Amount A is the sum of—
(a)
any amount by which the liability of the trustees to income tax for the
35
tax year 2007-08 is reduced under—
(i)
sections 2 and 6 of TIOPA 2010 (double taxation
arrangements: relief by agreement), or
(ii)
section 18(1)(b) and (2) of that Act (relief for foreign tax where
no double taxation arrangements), and
40

Finance Bill
Schedule 15 — Index-linked gilt-edged securities
130

(b)
any amount by which the liability of the trustees to income tax for the
following tax year is so reduced.
      (4)
Amount B is 20% of the amount (if any) of the trustees’ income pool as at the
start of the tax year 2009-10 (calculated in accordance with section 943 of ITA
2007).
5
Schedule 15
Section 42

Index-linked gilt-edged securities
Amendments of Chapter 12 of Part 5 of CTA 2009
1
Chapter 12 of Part 5 of CTA 2009 (loan relationships: special rules for
particular kinds of securities) is amended as follows.
10
2
In section 398(2) (overview of Chapter), for paragraph (a) substitute—
“(a)
sections 399 to 400C (index-linked gilt-edged securities),
(aa)
sections 401 to 405 (other gilt-edged securities),”.
3
For the heading before section 399 substitute—
“Index-linked gilt-edged securities”.
15
4     (1)
Section 399 (index-linked gilt-edged securities: basic rules) is amended as
follows.
      (2)
For the heading substitute “Basic rules”.
      (3)
For subsection (3) substitute—
“(3)
For provision requiring adjustments to be made to amounts
20
determined under subsection (2), see sections 400 to 400C
(adjustments for changes in index).”
      (4)
In subsection (4), for “section 400” substitute “sections 400 to 400C”.
5     (1)
Section 400 (index-linked gilt-edged securities: adjustments for changes in
index) is amended as follows.
25
      (2)
For the heading substitute “Adjustments for changes in index”.
      (3)
In subsection (1)(a)—
(a)
for “the amounts” substitute “an amount”, and
(b)
for “fall” substitute “falls”.
      (4)
After subsection (2) insert—
30
“(2A)
Subsection (2) is subject to sections 400A to 400C (relevant hedging
schemes).”
6
After section 400 insert—
“400A
Adjustments for changes in index: relevant hedging schemes
(1)
This section applies where—
35

Finance Bill
Schedule 15 — Index-linked gilt-edged securities
131

(a)
section 400 applies in relation to an amount to be brought into
account for an accounting period of a company (“company
A”) in respect of a security, and
(b)
conditions 1 to 3 are met.
(2)
Condition 1 is that company A is a party to a relevant hedging
5
scheme at any time in the accounting period.
(3)
Condition 2 is that there is an increase in the retail prices index
between the times mentioned in subsection (1) of section 400.
(4)
Condition 3 is that the index-linked capital return on the security in
the accounting period, or a proportion of it, is hedged.
10
(5)
Where this section applies, any increase in the carrying value of the
security at the earlier of the times mentioned in subsection (1) of
section 400 that would, apart from this section, be made under
subsection (2) of that section is reduced—
(a)
in a case in which the index-linked capital return on the
15
security in the accounting period is wholly hedged, to nil,
and
(b)
in a case in which only a proportion of that return is hedged,
by the same proportion.
(6)
For the purposes of this section “a relevant hedging scheme” means
20
a scheme the purpose, or one of the main purposes, of any party to
which, on entering into the scheme, is to secure that the index-linked
capital return on the security, or a proportion of it, is hedged.
(7)
For the purposes of this section the “index-linked capital return” of
the security is so much of the return on the security as—
25
(a)
would, disregarding section 400, result in an increase in the
carrying value of the security between the times mentioned
in subsection (1) of that section, and
(b)
is attributable to an increase in the retail prices index.
(8)
For the purposes of this section the index-linked capital return on the
30
security, or any proportion of that return, is “hedged” if (whether
because of the operation of a swap or otherwise) the pre-tax
economic profit or loss made by the relevant group or company in
the accounting period is unaffected by it.
(9)
In subsection (8) “the relevant group or company” means—
35
(a)
company A and every other company that is at any time in
the accounting period—
(i)
associated with company A, and
(ii)
a party to the relevant hedging scheme, or
(b)
if there is no such other company, company A.
40
(10)
In this section “scheme” includes any scheme, arrangements or
understanding of any kind whatever, whether or not legally
enforceable, involving a single transaction or two or more
transactions.