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Finance Act 1989

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This is the original version (as it was originally enacted).

Unit trusts etc.

78Certified unit trusts

The following sections shall be inserted after section 468 of the Taxes Act 1988—

468ACertified unit trusts

(1)For the purposes of sections 468B and 468C “certified unit trust” means, as respects an accounting period, a unit trust scheme in the case of which—

(a)an order under section 78 of the [1986 c. 60.] Financial Services Act 1986 is in force during the whole or part of that accounting period, and

(b)a certificate under section 78(8) of that Act, certifying that the scheme complies with the conditions necessary for it to enjoy the rights conferred by the UCITS directive, has been issued before or at any time during that accounting period.

(2)In this section—

  • “the UCITS directive” means the directive of the Council of the European Communities, dated 20th December 1985, on the co-ordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (no. 85/611/EEC), and

  • “unit trust scheme” has the same meaning as in section 469.

468BCertified unit trusts: corporation tax

(1)This section has effect as regards an accounting period of the trustees of a certified unit trust ending after 31st December 1989.

(2)Subject to subsection (3) below, the rate of corporation tax for a financial year shall be deemed to be the rate at which income tax at the basic rate is charged for the year of assessment which begins on 6th April in the financial year concerned.

(3)Where the period begins before 1st January 1990, subsection (2) above shall only apply for the purpose of computing corporation tax chargeable for so much of the period as falls in the financial year 1990 and subsection (4) below shall apply for the purpose of computing corporation tax chargeable for so much of the period as falls in the financial year 1989.

(4)So much of the period as falls after 31st December 1989 and before 1st April 1990 shall be deemed to fall in a financial year for which the rate of corporation tax is the rate at which income tax at the basic rate is charged for the year 1989-90.

(5)Where the period begins after 31st December 1989, section 338 shall have effect as if any reference to interest of any description were a reference to interest of that description on borrowing of a relevant description.

(6)For the purposes of subsection (5) above borrowing is of a relevant description if it is borrowing in respect of which there has been no breach during the accounting period of the duties imposed on the manager of the scheme by regulations under section 81 of the [1986 c. 60.] Financial Services Act 1986 with respect to borrowing by the trustees of the scheme.

(7)The Treasury may by regulations provide that for subsection (6) above (as it has effect for the time being) there shall be substituted a subsection containing a different definition of what constitutes borrowing of a relevant description for the purposes of subsection (5) above.

(8)Regulations under subsection (7) above may contain such supplementary, incidental, consequential or transitional provision as the Treasury think fit.

(9)In this section “certified unit trust” has the meaning given by section 468A.

468CCertified unit trusts: distributions

(1)Subsection (2) below applies where—

(a)as regards a distribution period ending after 31st December 1989 a dividend is treated by virtue of section 468(2) as paid to a unit holder (whether or not income is in fact paid to the unit holder),

(b)the dividend is treated as paid by the trustees of a unit trust scheme which is a certified unit trust as respects the accounting period in which the distribution period falls, and

(c)on the date of payment the unit holder is within the charge to corporation tax and not a dual resident.

(2)For the purpose of computing corporation tax chargeable in the case of the unit holder the payment shall be deemed—

(a)to be an annual payment, and not a dividend or other distribution, and

(b)to have been received by the unit holder after deduction of income tax at the basic rate, for the year of assessment in which the date of payment falls, from a corresponding gross amount.

(3)Subsection (2) above shall not apply where the rights in respect of which the dividend is treated as paid are held by the trustees of a unit trust scheme which on the date of payment is a fund of funds.

(4)Where the unit holder is on the date of payment the manager of the scheme, subsection (2) above shall not apply in so far as the rights in respect of which the dividend is treated as paid are rights held by him in the ordinary course of his business as manager of the scheme.

(5)Subsection (2) above shall not apply to so much of the payment as is attributable to income of the trustees arising before 1st January 1990.

(6)In this section—

  • “certified unit trust” has the meaning given by section 468A,

  • “distribution period” has the same meaning as in section 468,

  • “dual resident” means a person who is resident in the United Kingdom and falls to be regarded for the purposes of any arrangements having effect by virtue of section 788 as resident in a territory outside the United Kingdom,

  • “fund of funds” means a unit trust scheme the sole object of which is to enable the unit holders to participate in or receive profits or income arising from the acquisition, holding, management or disposal of units in unit trust schemes, and

  • “unit trust scheme” has the same meaning as in section 469.

79. Funds of funds.

The following section shall be inserted after section 468C of the Taxes Act 1988—

468DFunds of funds: distributions

(1)Subsection (2) below applies where—

(a)as regards a distribution period ending after 31st December 1989 a dividend is treated by virtue of section 468(2) as paid to a unit holder (whether or not income is in fact paid to the unit holder),

(b)the dividend is treated as paid by the trustees of a unit trust scheme which on the date of payment is a fund of funds, and

(c)on the date of payment the unit holder is within the charge to corporation tax and not a dual resident.

(2)For the purpose of computing corporation tax chargeable in the case of the unit holder the payment shall be deemed—

(a)to be an annual payment, and not a dividend or other distribution, and

(b)to have been received by the unit holder after deduction of income tax at the basic rate, for the year of assessment in which the date of payment falls, from a corresponding gross amount.

(3)Where the unit holder is on the date of payment the manager of the scheme, subsection (2) above shall not apply in so far as the rights in respect of which the dividend is treated as paid are rights held by him in the ordinary course of his business as manager of the scheme.

(4)Subsection (2) above shall not apply to so much of the payment as is attributable to income of the trustees arising before 1st January 1990.

(5)In this section—

  • “distribution period” has the same meaning as in section 468,

  • “dual resident” and “fund of funds” have the same meanings as in section 468C,

  • “unit trust scheme” has the same meaning as in section 469.

80Gilt unit trusts

(1)Where, in the case of a certified unit trust and apart from this subsection, section 468(5) of the Taxes Act 1988 would apply as regards a distribution period beginning after 31st December 1989, section 468(5) shall not apply in the case of the trust as regards that period.

(2)Where by virtue of subsection (1) above the last distribution period as regards which section 468(5) applies in the case of a certified unit trust is one beginning on or before, and ending after, 31st December 1989, the trustees' liability to income tax in respect of any source of income chargeable under Case III of Schedule D shall be assessed as if they had ceased to possess the source of income on the last day of that distribution period.

(3)But where section 67 of the Taxes Act 1988 applies by virtue of subsection (2) above, it shall apply with the omission from subsection (1)(b) of the words from “and shall” to “this provision”.

(4)For the purposes of this section “certified unit trust” means, as respects a distribution period, a unit trust scheme in the case of which—

(a)an order under section 78 of the [1986 c. 60.] Financial Services Act 1986 is in force during the whole or part of the accounting period in which the distribution period falls, and

(b)a certificate under section 78(8) of that Act, certifying that the scheme complies with the conditions necessary for it to enjoy the rights conferred by the UCITS directive, has been issued before or at any time during that accounting period.

(5)In this section—

  • “distribution period” has the same meaning as in section 468 of the Taxes Act 1988,

  • “the UCITS directive” means the directive of the Council of the European Communities, dated 20th December 1985, on the co-ordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (No. 85/611/EEC), and

  • “unit trust scheme” has the same meaning as in section 469 of the Taxes Act 1988.

81Offshore funds operating equalisation arrangements

(1)In section 758 of the Taxes Act 1988 (offshore funds operating equalisation arrangements) in subsection (6) (reference to section 78 of the [1979 c. 14.] Capital Gains Tax Act 1979 not to include reference to it as applied by section 82) for the words “but not” there shall be substituted the words “and a reference to section 78”.

(2)This section shall apply where a conversion of securities occurs on or after 14th March 1989; and “conversion of securities” here has the same meaning as in section 82 of the Capital Gains Tax Act 1979.

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