Income Tax (Trading and Other Income) Act 2005 section 376

Authorised unit trust interest distributions

Section 376 explains how distributions from authorised unit trusts are treated as payments of yearly interest to unit holders for income tax purposes.

• Where an authorised unit trust's distribution accounts show the total amount available for distribution as yearly interest, each unit holder is treated as receiving a payment of yearly interest in proportion to their rights
• The section does not apply if the authorised unit trust is an approved personal pension scheme
• The effect is that unit holders are taxed on their share of the trust's distributable income when the distribution is made, rather than when they sell their units
• Whether distributions are treated as interest or as dividends depends on how the trust has allocated the money in its accounts, with interest distributions dealt with here and dividend distributions dealt with separately