A statutory instrument has now been issued that includes amendments to take non - exempt unauthorized unit trusts (NEUUTs) out of the deemed loan relationship rules in section 490 of CTA 2009. This is a logical development; if a NEUUT holds loan relationship assets then these will be taxed in the NEUUT so there would be the potential for double taxation if a company's holding of the NEUUT was also in the loan relationship legislation.
The new legislation comes into effect from 6th April 2014 (i.e. it co-insides with the new regime for unauthorized unit trusts) and the SI can be found here.
The change to the legislation also means that if a NEUUT holds both bonds and equities then the tax treatment of income will be correct for a corporate, that is the loan relationships will be taxed in the NEUUT, the dividend income will be exempt and the dividends from the NEUUT will be received as dividends with no further tax to pay for a company. This avoids the problem that, I think, exists for AIFs under the new section 490.
As I've said before the HMRC people dealing with unauthorized unit trusts seem to have a rather better understanding of the issues involved than their colleagues involved in the reform of the loan relationship provisions. Sadly, although NEUUTs have lots of good features, there is still the problem that they are not CGT exempt so can give rise to a double charge to tax on capital gains.
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