Fidelity funds tax ruling

Press, 6 July 1985, Page 5

Fidelity funds tax ruling

PA Wellington Income tax has to be paid on the money earned from investing lawyers’, and accountants’ fidelity funds, the High Court has ruled. In a judgment delivered on Wednesday, the Chief Justice, Sir Ronald Davison, said that fidelity funds of the Society of Accountants and the Law Society did not qualify as charitable trusts and any money earned on them was not exempt from income tax. The fidelity, funds are contributed to by members of the two professions to reimburse anyone who loses money because of improper dealing by a lawyer or accountant, or their employees. The societies objected to paying income tax on the funds’ earnings.

The Society of Accountants objected to payment on the $41,632 income it received from the fund in the year ended June 30,1982 and the $80,191 for the year ended June 30, 1983. The Law Society objected to the assessment of income tax on the' $157,453 earned by its fidelity fund in the year ended December 31, 1983. The issue in each case was whether the income was exempt from payment of income tax because it was income derived by trustees in trust for charitable purposes, Sir Ronald said. He said the fidelity funds were not beneficial to the community as that expression related to charitable trusts but were private trusts for the benefit of individual clients.