Section 311
Section 311: charge of tax where members' shares are unknown
Section 311 sets the tax rate that applies to an association of persons (AOP) or body of individuals (BOI) itself, depending on whether the members' shares are known and on the members' own tax positions - ranging from the maximum marginal rate to a higher rate matching a high-income member.
Shares indeterminate or unknown: maximum marginal rate (or higher)
Where the individual shares of AOP/BOI members in the whole or any part of its income are indeterminate or unknown, tax is charged on the AOP/BOI's total income at the maximum marginal rate - subject to the next rule.
If any member's own total income is chargeable to tax at a rate higher than the maximum marginal rate, tax is instead charged on the AOP/BOI's total income at that higher rate.
Shares determinate and known: rate depends on members' own income
Where the individual shares are determinate and known: if any member's total income for the tax year (excluding his share from the AOP/BOI) exceeds the maximum amount not chargeable to tax, tax is charged on the AOP/BOI's total income at the maximum marginal rate.
If the AOP/BOI's total income is chargeable to tax at a rate higher than the maximum marginal rate for the tax year: the portion of its total income relatable to that member's share is taxed at that higher rate, and the balance of the AOP/BOI's total income is taxed at the maximum marginal rate.
When shares are deemed "indeterminate or unknown"
For the purposes of Section 311, members' individual shares (in the whole or any part of the AOP/BOI's income) are deemed indeterminate or unknown if they are indeterminate or unknown on the date the AOP/BOI was formed, or at any time afterward.
Frequently asked questions
What tax rate does an AOP pay if its members' shares are unknown?
The maximum marginal rate under Section 311(1), unless a member's own total income is chargeable at an even higher rate, in which case that higher rate applies to the AOP's whole total income under Section 311(2).
Does a high-income member affect the AOP's tax rate even when shares are known?
Yes - under Section 311(3), if a member's own income (excluding his AOP share) already exceeds the tax-free threshold, the maximum marginal rate applies to the AOP's total income; and if the AOP is chargeable at a higher rate for the year, the portion relating to that member's share is taxed at that higher rate while the rest is taxed at the maximum marginal rate.
Related sections
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