Private Sector Service Charges and Sinking Funds
FA 2006 introduced a relief for social landlords by excluding, from the 40% trust rate, income arising from service charges and sinking funds held on trust. For income arising in 2007/08 onwards, this relief is to be extended to private landlords (in respect of properties situated in the UK).

Income Tax Charges on Trusts
Two errors in the trust modernising legislation in FA 2006 are to be corrected in the Finance Bill. The first concerns a payment received by trustees from a company buying back its own shares in a case where such payment falls within the income tax regime as a distribution rather than the capital gains tax regime. The excess of the distribution over the original subscription price paid for the shares is chargeable at the dividend trust rate of 32.5%. The error means that from 6 April 2006 the whole of the distribution is chargeable and not just the excess. The error is being corrected with backdated effect from 6 April 2006. The second error concerns a chargeable event gain on a life policy etc. which is chargeable at the trust rate of 40%. The 20% notional tax credit is not permitted to enter the trustees’ tax pool which determines how much the trustees may distribute to beneficiaries without incurring further tax charges. The error means that for 2006/07 only, the notional tax credit can enter the pool. The position will be corrected for 2007/08 onwards.