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If an interest distribution is made to a participant that is chargeable to income tax there is (from 6 April 2017) no requirement that a sum on account of tax must be deducted at source¹. Prior to 6 April 2017, tax had to be deducted at source; see A4.424, A4.425. This brings the treatment of these types of savings income into line with that of interest paid on bank and building society accounts following the introduction of the personal savings allowance.

This contrasts with the tax treatment of commission payments made to investors in a collective investment scheme by fund managers, fund platforms, advisers, or other intermediary between the fund and the investor. HMRC take the view that payments of 'trail commission' passed on to investors in such schemes are annual payments (E1.510) that are subject to income tax, and they expect payers of commission to deduct basic rate tax at source and investors to include such payments in their self-assessment returns²; see A4.424. This view was confirmed in Hargreaves³.

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