Funds Investing

The question before the court was the liability of the trustee to income tax on the interest. The relevant tax legislation made no provision for the deduction of tax from payments of income out of trust estates. The trustee argued, relying on Baker, that the liability to tax of income received by trustees depended upon the position as regards liability of the beneficiary; that in this case the interest received was treated as capital as a matter of ordinary principles of accounting between trustees and income- beneficiaries; that the beneficiaries would never receive the interest as income and therefore no liability to tax was possible. It was held by the Scottish Court of Session that on construction of the statute the interest was income and the trustees were the persons receiving or entitled to the income. Read the rest of this entry »

On the question of the rights of unitholders in the underlying assets of the trust fund, there are two strands of authorities that may be relevant to our understanding. In the first place, as the vast body of trust law is derived from trusts used in family dispositions, the line of cases after Baker v. Archer-Shee will be relevant. Indeed, Baker has been applied in commercial trusts and none of the decisions finds it necessary to distinguish the commercial from the family situations. Deed of settlement companies can be regarded as the origin of modern unit trusts, both in form and substance. The approaches of cases on such companies will illuminate our analysis. Read the rest of this entry »