Commentary

D8.118 Participants chargeable to income tax

Corporate tax
Corporate tax | Commentary

D8.118 Participants chargeable to income tax

Corporate tax | Commentary

D8.118 Participants chargeable to income tax

If an interest distribution is made to a participant that is chargeable to income tax there is (from 6 April 2017) no requirement that a sum on account of tax must be deducted at source1. Prior to 6 April 2017, tax had to be deducted at source; see A4.424, A4.425. This brings the treatment of these types of savings income into line with that of interest paid on bank and building society accounts following the introduction of the personal savings allowance.

This contrasts with the tax treatment of commission payments made to investors in a collective investment scheme by fund managers, fund platforms, advisers, or other intermediary between the fund and the investor. HMRC take the view that payments of 'trail commission' passed on to investors in such schemes are annual payments (E1.510) that are subject to income tax, and they expect payers of commission to deduct basic rate tax at source and investors to include such payments in their self-assessment returns2; see A4.424. This view was confirmed in Hargreaves3.

The deduction obligation does not apply if4:

  1.  

    (a)     the participant is a company

  2.  

    (b)     the participant consists of the trustees of a unit trust scheme

  3.  

    (c)     the reputable intermediary condition is met with respect to a participant on the distribution date

  4.  

    (d)     the residence condition is met with respect to a participant on the distribution date; or

  5.  

    (e)     (for units acquired on or after 19 December 2013) the offshore marketing condition is met

However, the exclusion

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