SAIM6120 - Collective investment schemes: unauthorised unit trusts: administration

Involvement of manager

The purchase and sale price of existing units reflects accrued income up to the date of purchase and sale. In these cases the manager ends up out of pocket as, although on resale the manager recovers the original value of the unit, the accrued income which formed part of the manager's purchase price and the income accruing whilst the unit was held by the manager is not recovered (the equalisation included in the sale price is returned to the unit holder).

An amount, or an averaged amount, representing the unrecovered income is distributed from the distribution account to the manager, notwithstanding that the units are no longer held.

Payments to managers: deemed payments

These payments should appear in the accounts of the trust as part of the income available for distribution or investment. They should be treated in the manager's hands as deemed payments received under deduction of income tax in the same way as for current unit holders. Similarly the trust will be required to account for the tax deducted.

Tax statements

The trustees are required by ITA07/S975 (and Regulations under the Financial Services and Markets Act 2000) to provide statements for tax purposes in respect of the annual payments of the trust. The statements must show the gross amount of the annual payment, the tax deducted and the net income. Entries may also be needed to show the amount of any equalisation returned to the unit holders or of any management expenses charged to them.

The statement is unlikely to say that it is a distribution by an unauthorised unit trust. However, only unauthorised unit trusts pay distributions as deemed payments with income tax deducted at the basic rate.

The Unauthorised Unit Trust Centre, Sheffield approves the form of tax statements for new trusts, and any changes in statements for existing trusts.