Find out about changes to Unauthorised Unit Trusts (UUTs) for tax year 2017 to 2018.
The tax treatment of a UUT will depend on whether the UUT is:
- an exempt UUT
- a non-exempt UUT
- a mixed UUT
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 (for reasons other than residency), and must be approved under the regulations as an exempt UUT.
Applications for exempt status may be made to HM Revenue and Customs (HMRC) on form CISC11 and must be made no later than the last day of the first period of account for which approval is sought.
For the regulations governing an exempt UUT see the Unauthorised Unit Trusts (Tax) Regulations 2013, Statutory Instrument 2013 No. 2819.
Continuing requirements for approval require exempt UUTs to:
- file a tax return (SA900) for Income Tax purposes with a copy of the trust’s accounts and a statement from the managers or the trustees that the condition in regulation 3(1)(b) has been met throughout the period
- the accounts for the period - must be prepared in accordance with the Investment Management Association Statement of Recommended Practice or its principles so far as relating to determining revenue and capital, and must be audited by a qualified independent auditor as being so prepared
- the condition in regulation 3(1)(b) is that throughout the period all of its unit holders are eligible investors - the statement should be made using form CISC12
Failure to meet the continuing requirements for approval by the final self assessment statutory filing deadline each year may result in the withdrawal of approval as an exempt UUT. A UUT is a non-exempt UUT if it’s not an exempt UUT.
- income for the tax year will normally be the income for a 12 month accounting period ending in the year of assessment
- all income shown in the accounts for that period is treated as arising in the tax year
- there is no longer a requirement for trustees to deduct tax from deemed payments to unit holders
- trustees who made or are treated as having made a deemed payment should tick the ‘Yes’ box Q10A and complete boxes 10.2A to 10.4A
- exempt UUTs are not required to return capital gains
If unit holders of an exempt UUT are treated as receiving income, the trustees are treated as making a deemed payment of the same amount on the final day of the period of account.
The trustees are entitled to relief for a tax year equal to the amount of the deemed payments treated as made in that year. The relief is given by deducting that amount in calculating the trustees’ net income for the tax year.
The total amount of the relief for a tax year mustn’t exceed the amount of the trustees’ modified net income for the tax year.
If there is an excess, that excess is to be treated as if it were a deemed payment in the basis period for the following tax year.
A non-exempt UUT is a UUT that is neither an exempt UUT nor a mixed UUT.
A non-exempt UUT is within charge to Corporation Tax and should notify HMRC of this as soon as possible and must do so within 12 months of the last day of its first accounting period.
A new accounting period starts when a non-exempt UUT first comes within the charge to Corporation Tax.
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 its Self Assessment: Trust and Estate Tax Return (SA900) in the same way as for earlier tax years.