HC Deb 13 July 1988 vol 137 cc377-8

'. Section 469 of the Taxes Act 1988 (taxation of unauthorised and certain other unit trusts) shall have effect, and shall be deemed always to have had effect, with the insertion of the following subsections after subsection (5)—

"(5A) Subsections (5B) below applies where for any year of assessment—

  1. (a) the trustees are (or, apart from this subsection, would be) chargeable under section 350 with tax on payments treated as made by them under subsection (3) above, and
  2. (b) there is an uncredited surplus in the case of the scheme.

(5B) Where this subsection applies, the amount on which the trustees would otherwise be so chargeable shall be reduced—

  1. (a) if the surplus is greater than that amount, to nil, or
  2. (b) if it is not, by an amount equal to the surplus.

(5C) For the purposes of subsections (5A) and (5B) above whether there is an uncredited surplus for a year of assessment in the case of a scheme (and, if so, its amount) shall be ascertained by—

  1. (a) determining, for each earlier year of assessment in which the income on which the trustees were chargeable to tax by virtue of subsection (2) above exceeded the amount treated by subsection (3) above as annual payments received by the unit holders, the amount of the excess,
  2. (b) aggregating the amounts determined in the case of the scheme under paragraph (a) above, and
  3. (c) deducting from that aggregate the total of any reductions made in the case of the scheme under subsection (5B) above for earlier years of assessment.

(5D) The references in subsection (5C)(a) above to subsections (2) and (3) above include references to subsections (2) and (3) of section 354A of the 1970 Act.".'.—[Mr. Norman Lamont.]

Brought up, and read the First time.

The Financial Secretary to the Treasury (Mr. Norman Lamont)

I beg to move, That the clause be read a Second time.

The new clause addresses a technical problem affecting the rules for taxing the income of unauthorised unit trusts. We discussed the matter briefly in Committee. The present rules can produce an excessive tax charge on a trust. 'That occurs when the trust income for a tax year is less than the income that it distributes to its unit holders. The extra tax charge will reduce the amount that the trustees can distribute and will therefore disadvantage unit holders, including charities and pension funds.

The point was raised by my hon. Friend the Member for Wanstead and Woodford (Mr. Arbuthnot), who tabled a new clause that we were unable to accept. I said that we would table our own new clause.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

If we were living in the mid-17th century—and given the way our proceedings have gone in the past week one could be forgiven for being under such a misapprehension—the new clause would be known as the Concession of Arbuthnot, in honour of the hon. Member for Wanstead and Woodford (Mr. Arbuthnot). That has a nice mid-17th century ring to it. The one late-20th century point of which the Financial Secretary should have informed the House is how much it will cost, and I wonder whether he would do so now.

Mr. Norman Lamont

The cost will be minimal.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

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