Income Tax Act 2007 section 667

Trustees' accrued income profits treated as settlement income

Section 667 ensures that certain accrued income profits arising to settlement trustees are treated as settlement income taxable on the settlor, including where the trustees are non-UK resident.

• Where trustees make qualifying accrued income profits, those profits are treated as income arising under the settlement and can therefore be taxed on the settlor under the settlements legislation in ITTOIA 2005.
• Non-UK resident trustees are caught by this provision: if they would have made accrued income profits had they been UK resident during part of the relevant tax year, those hypothetical profits are still treated as settlement income taxable on the settlor.
• Qualifying accrued income profits are those arising under section 628(5) (the general rule) or under section 630(2) in respect of transfers of variable rate securities — but they do not include profits on transfers with unrealised interest or profits charged on withdrawal of unremittable income relief.
• Where there are no trustees of a settlement, the rules apply instead to any persons entitled to the securities comprised in the settlement.