(1)Chapter 3 of Part 12 of the Taxes Act 1988 (unit trust schemes) is amended as follows.
(2)In section 468L(4) (obligation to deduct tax from interest distributions to be subject to provision made by sections 468M and 468N), for “sections 468M and 468N” substitute “ section 468M ”.
(3)For sections 468M and 468N substitute—
(1)Where an interest distribution is made for a distribution period to a unit holder, any obligation to deduct under section 349(2) does not apply to the interest distribution if—
(a)the unit holder is a company or the trustees of a unit trust scheme, or
(b)either the residence condition or the reputable intermediary condition is on the distribution date fulfilled with respect to the unit holder.
(2)Section 468O makes provision about the circumstances in which the residence condition or the reputable intermediary condition is fulfilled with respect to a unit holder.”.
(4)Section 468O (residence condition) is amended as follows.
(5)In subsection (1), for “sections 468M and 468N” substitute “ section 468M ”.
(6)After that subsection insert—
“(1A)For the purposes of section 468M, the reputable intermediary condition is fulfilled with respect to a unit holder if—
(a)the interest distribution is paid on behalf of the unit holder to a company,
(b)the company either is subject to the EC Money Laundering Directive, or to equivalent non-EC provisions, or is an associated company resident in a regulating country or territory of a company which is so subject, and
(c)the trustees of the authorised unit trust have reasonable grounds for believing that the unit holder is not ordinarily resident in the United Kingdom.
(1B)For the purposes of subsection (1A)(b) above—
(a)a company is subject to the EC Money Laundering Directive if it is a credit institution or financial institution as defined by Article 1 of Directive 91/308/EEC, as amended by Directive 2001/97/EC,
(b)a company is subject to equivalent non-EC provisions if it is required by the law of any country or territory which is not a member State to comply with requirements similar to those which, under Article 3 of that Directive (as so amended), member States must ensure are complied with by credit institutions and financial institutions,
(c)a company is to be treated as another’s associated company if it would be so treated for the purposes of Part 11 (see section 416), and
(d)a country or territory is a regulating country or territory if it either is a member State or imposes requirements similar to those which, under Article 3 of that Directive (as so amended), member States must ensure are complied with by credit institutions and financial institutions.
(1C)If Directive 91/308/EEC ceases to have effect, or is further amended, the Treasury may by order make consequential amendments in subsections (1A) and (1B) above.”.
(7)In the sidenote, insert at the end “ and reputable intermediary condition ”.
(8)In section 468P(1) (residence declarations)—
(a)for “468O” substitute “ 468O(1) ”, and
(b)for “subsections (2) to (4)” substitute “ subsection (2) or (3) ”.
(9)After section 468P insert—
Where—
(a)an interest distribution is made to a unit holder by the trustees of an authorised unit trust,
(b)the trustees, in reliance on the reputable intermediary condition being fulfilled with respect to the unit holder, do not comply with the obligation under section 349(2) to make a deduction from the interest distribution,
(c)that obligation would apply but for that condition being so fulfilled, and
(d)(contrary to the belief of the trustees) the unit holder is in fact ordinarily resident in the United Kingdom,
section 350 and Schedule 16 have effect as if that obligation applied.
(1)The Board may by regulations make provision for giving effect to sections 468M to 468PA.
(2)The regulations may, in particular, include provision modifying the application of those sections in relation to interest distributions made to or received under a trust.
(3)The regulations may, in particular, include provision for the giving by officers of the Board of notices requiring trustees of authorised unit trusts to supply information and make available books, documents and other records for inspection on behalf of the Board.
(4)The regulations may—
(a)make provision in relation to times before they are made,
(b)make different provision for different cases, and
(c)make such supplementary, incidental, consequential or transitional provision as appears to the Board to be appropriate.”.
(10)Section 98 of the Taxes Management Act 1970 (c. 9) (penalties: provisions requiring information etc in response to notices) is amended as follows.
(11)In subsection (4A)(b), for “or (4D)” substitute “ , (4D) or (4E) ”.
(12)After subsection (4D) insert—
“(4E)A payment is within this subsection if—
(a)it is an interest distribution made to a unit holder by the trustees of an authorised unit trust,
(b)the trustees, in purported reliance on the reputable intermediary condition being fulfilled with respect to the unit holder, do not comply with the obligation under section 349(2) of the principal Act to make a deduction from the interest distribution,
(c)that obligation would apply if that condition were not so fulfilled, and
(d)the trustees did not believe that the unit holder was not ordinarily resident in the United Kingdom or could not reasonably have so believed (so that that condition was not so fulfilled).
Expressions used in this subsection have the same meaning as in Chapter 3 of Part 12 of the principal Act.”.
(13)In the first column of the Table, after the entry relating to regulations under section 431E(1) or 441A(3) of the principal Act, insert—
“ section 468P(6); regulations under section 468PB(3); ”.
(14)This section has effect in relation to interest distributions made on or after 16th October 2002.