Income Tax Act 2007 Explanatory Notes

Section 515: Rate of tax

1538.This section sets out the rate at which the income charged under section 512 is to be taxed. It is based on section 694(2A) of ICTA.

1539.That rate of tax is arrived at by subtracting the trust rate from the higher rate of income tax. This applies to income of all types, including dividend income.

1540.In the particular case of dividend income, the provision does not seek to reinstate the effect of charging the settlor instead of the trustee. (Dividend income would generally be charged on an individual at the dividend upper rate, and on the trustees of the HMS at the dividend trust rate. But the difference between these rates is not necessarily the same as that between the rates referred to by this section.)

1541.From the tax year 2004-05 onwards, the trust rate has been aligned with the higher rate. So, at present, there can be no charge under section 512. But the situation could change in the future.

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