Explanatory note

These Regulations amend the Unauthorised Unit Trusts (Tax) Regulations 2013 (the “principal Regulations”).

Regulation 1 provides for citation and commencement.

Finance (No. 2) Act 2015 (c.33) restricted deductions for finance costs related to residential property under new sections 272A and 272B of the Income Tax (Trading and Other Income) Act 2005 (“ITTOIA 2005”). However, a tax reduction was given for individuals by new section 274A ITTOIA 2005, and for trustees with accumulated or discretionary income by new section 274B ITTOIA 2005. Trustees of an exempt unauthorised unit trust (“EUUT”) or a mixed unauthorised unit trust (“MUUT”) did not receive such a tax reduction under those provisions.

Regulation 3 therefore inserts a new paragraph (3A) after regulation 12(3) of the principal Regulations to provide that subsections (1) to (4) of section 272A of ITTOIA 2005 do not apply when calculating the income of trustees of an EUUT.

Regulation 4 inserts a new paragraph (3) after regulation 32(2) of the principal Regulations to provide that when applying section 504 of the Income Tax Act 2007 to an MUUT, subsections (1) to (4) of section 272A of ITTOIA 2005 do not apply when calculating the income of the trustees.

A Tax Information and Impact Note has not been prepared for this instrument as it contains no substantive changes to tax policy.