Changes to Unauthorised Unit Trusts for tax year 2014 to 2015.
Changes to the tax regime for Unauthorised Unit Trusts (UUTs) were set out in detail in a Technical Note.
Some UUTs will see a change of basis period for calculating income when filling in the tax return for the year 2014 to 2015. This will depend on whether the UUT is:
- a mixed UUT
- a non-exempt UUT
- an exempt UUT
If you’re a trustee, you’ll need to decide the basis period to use when filling in your tax return (SA900) for the tax year 2014 to 2015.
If you’re the trustee of an exempt unauthorised unit trust, with an accounting date ending on or before 31 October 2013 in the year 2013 to 2014, there are different rules you’ll need to apply for the transitional year 2014 to 2015.
Any UUT with at least one exempt unit holder and one non-exempt unit holder for the entire period from 24 May 2012 to 5 April 2014 will be a mixed UUT and will complete a tax return (SA900) for the tax year 2014 to 2015 in the same way as for earlier tax years.
A non-exempt UUT is a UUT that is neither an exempt UUT nor a mixed UUT. Tax year 2013 to 2014 was the final tax year for which a non-exempt UUT had to file a tax return (SA900) for income tax purposes.
A non-exempt UUT is within charge to Corporation Tax from 6 April 2014. You should notify HM Revenue and Customs (HMRC) of this as soon as possible but must do so within 12 months of the last day of its first accounting period ending on or after 6 April 2014. A new accounting period starts when a non-exempt UUT first comes within the charge to Corporation Tax. Distributions made by a non-exempt UUT in respect of income arising after 5 April 2014 are treated as distributions made by a company.
A non-exempt UUT within the charge to Corporation Tax may also be liable to pay tax by quarterly instalment payments if it is large (see CTM92510 for further guidance or contact a relevant member of the Collective Investment Schemes Centre (CISC) team. The first quarterly instalment will be payable 6 months and 13 days after the start of the accounting period.
An exempt UUT is one whose trustees are UK resident and whose investors are all exempt from Capital Gains Tax or Corporation Tax on chargeable gains (other than because of residence). They must be approved under the regulations as an exempt UUT. Applications for exempt status may be made to HMRC on form CISC11 no later than the last day of the first period of account for which approval is sought.
A UUT with an accounting period end date of 31 December has until 31 December 2014 to submit its application to HMRC for exempt status. If an exempt status application isn’t made, or a late application is refused, the UUT is treated as a non-exempt UUT liable to Corporation Tax from 6 April 2014. Any distributions to its investors are treated as company distributions (which aren’t deductible in arriving at the tax liability of the trustees for the period).
An exempt UUT with an accounting date after 31 October 2013 in the year 2013 to 2014 will complete its tax return (SA900) for the tax year 2014 to 2015 in accordance with the new regime with its basis period being the 12 months ending with the accounting date in the year 2014 to 2015.
For an exempt UUT with an accounting date on or before 31 October 2013 in the year 2013 to 2014 the tax year 2014 to 2015 is the transitional year. The transitional rules state:
- income for the tax year 2014 to 2015 will be income arising between 6 April 2014 and the accounting date in that year
- all income shown in the accounts for that period is treated as arising in tax year 2014 to 2015
- any deemed payment of income for that period which would have been treated as arising to unit holders after 5 April 2015 will now be treated as arising on 5 April 2015
- the exempt UUT will be entitled to a deduction for the deemed payment of this income on 5 April 2015
Annual payments and deemed payments to investors
Annual payments will continue to be made under deduction of income tax by UUTs in the basis period for 2014 to 2015 by:
- all mixed UUTs
- any exempt UUT for which 2014 to 2015 is the transitional year because its accounting year end was on or before 31 October 2013 in the tax year 2013 to 2014
- any exempt UUT where 2013 to 2014 was the transitional year and
- fully within the new tax regime for 2014 to 2015
- where annual payments were made, or treated as made, to investors in the basis period up to and including 5 April 2014
In these cases, boxes 10.2A to 10.4A of the tax return for 2014 to 2015 should be completed in the normal way.
Deemed payments will be made gross, without deduction of tax :
- by any exempt UUT which is fully within the new tax regime for 2014 to 2015 (ie where the transitional year was 2013 to 2014)
- where any or all deemed payments are made on or after 6 April 2014
In these circumstances, the gross amount of all deemed payments must be entered in box 10.4A of the 2014 to 2015 tax return, ignoring boxes 10.2A and 10.3A. These payments are deductible against the trustees’ modified net income in arriving at the trustees’ tax liability for the year.
If there is an excess of deemed payments over trustees’ modified net income, the excess is carried forward and treated as if it were a deemed payment in the basis period for the following tax year.
Trustees Income Pool
The Trustees Income Pool is a running total of the excess of modified unrelieved total income over deemed payments. Where the deemed payments treated as made in the transitional year exceed the trustees modified net income for that year, the deemed payments may be reduced by the Trustees Income Pool.
If the transitional year of the exempt UUT is 2014 to 2015, you will need to calculate the Trustees Income Pool at 6 April 2014 and notify HMRC of this. You can show details of your workings in the ‘Additional Information’ space at box 21.11 of the tax return (SA900) or attach these separately.
In all cases, details of the UUT’s accounting date should be included in the tax return, again in the ‘Additional Information’ space at box 21.11.