Budget Notes

BN32 TIMING OF INCOME TAX PAYMENTS BY UNAUTHORISED UNIT TRUSTS

Who is likely to be affected?

1. Trustees of unauthorised unit trusts.

General description of the measure

2. Legislation will be included in Finance Bill 2008 to amend unintentional changes introduced in the Income Tax Act 2007 (ITA), which altered the time at which tax deducted from distributions made by unauthorised unit trusts to their unit holders is payable to HM Revenue & Customs (HMRC).

Operative date

3. The changes will have effect on and after the date that Finance Bill 2008 receives Royal Assent.

Current law and proposed revisions

4. Under section 964(5) of ITA, trustees of unauthorised unit trusts are only required to pay to HMRC the income tax they deduct from their unit holders in any year at the end of the following tax year (so for example, for tax deducted in the tax year 2007-08 need only be paid at the end of January 2009).

5. This measure will repeal section 964(5). With effect from the tax year 2008-09 and all subsequent tax years, trustees of unauthorised unit trusts will be required to make payments on account of the tax due to HMRC on the 31 January and 31 July of one year, with a balancing payment or claim made on 31 January the following year. (For example, for the tax year 2008-09 payments on account will be due on 31 January 2009 and 31 July 2009, with a balancing payment on 31 January 2010). This will reinstate the position that existed prior to the unintentional changes introduced by ITA.

Further advice

6. If you have any questions about this change, please contact Liz Foster on 0114 2969 377 (email: liz.foster@hmrc.gsi.gov.uk) or Sandra Whyman on 0114 2969 688 (email: sandra.whyman@hmrc.gsi.gov.uk). Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk