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HMRC internal manual

Investment Funds Manual

Definition of an exempt unauthorised unit trust (EUUT)

Regulation 3 of the UUT Regulations (SI 2013/2819) defines an EUUT. An unauthorised unit trust (UUT) is an EUUT for a period of account where:

(a)  Its trustees are UK resident for the period;

(b) All its unit holders are ‘eligible investors’ throughout the period as defined by ‘the eligible investor test’; and

(c)  It is approved for that period by HMRC.

Who are eligible investors?

A unit holder is an eligible investor if:

  • Any gain arising on the disposal of its units would be wholly exempt from capital gains tax or corporation tax on capital gains, other than because of residence; or
  • It holds all its units pending disposal in the capacity of manager of the UUT.

Eligible investors include UK and non-UK registered pension schemes, authorised unit trusts, open-ended investment companies and charities.

Entities which are not eligible investors include: UK Real Estate Investment Trusts (REITs), Irish Common Contractual Funds and UK Authorised Contractual Schemes.

When can a UUT remain an EUUT if it has a non-eligible investor?

Where an UUT has a non-eligible investor it may still be treated as meeting the eligible investor test provided:

  • The managers or trustees of a UUT identify as soon as reasonably possible that a unit holder is not an eligible investor; and
  • That unit holder disposes of its units within 28 days of that time.

This rule may not be relied on more than twice in any period of 10 years. In practice multiple breaches are likely to be rare but the effect would be that the UUT will cease to be an EUUT and will come within charge to corporation tax as a non-exempt unauthorised unit trust (NEUUT).