IFM10230 - Approval of an exempt unauthorised unit trust (EUUT)

The managers or trustees of an UUT seeking to set up an EUUT must apply to HMRC for approval. Regulations 4 to 9 of the UUT Regulations (SI 2013/2819) set out the content and timing of an application and the ongoing requirements to retain approval in each period of account.

How to apply for approval as an EUUT – regulation 4

An application for approval must be made on or before the last day of the first period of account for which approval is sought (or a later date allowed by HMRC). Once an application is approved then the approval has effect for the first period of account and all subsequent periods unless approval is withdrawn by HMRC.

Applications may be made using form CISC11 “Application for approval as an exempt unauthorised unit trust” which can be found on the Gov.uk website.

HMRC must be satisfied that the UUT has, or will have, arrangements in place to ensure that all unit holders are eligible investors. The UUT Regulations do not prescribe what those arrangements should be but HMRC would expect that the managers or trustees can:

● Establish that potential new investors are eligible before they invest;

● Clearly communicate to investors the need to notify the manager or trustees if they become ineligible;

● Require investors to confirm on an annual basis that they remain eligible; and

● Keep adequate records and adequately oversee these procedures.

Contents of an application – regulation 5

The application must contain:

● A statement specifying the first day of the first period of account for which approval is sought;

● The current trust deed and a copy of the most recent prospectus or similar document made available to investors;

● A statement whether or not the UUT will be operating equalisation arrangements; and

● A statement specifying what will be done to ensure that all unit holders are eligible investors for the first and all subsequent periods.

The application may cite a provisional first day of the first period of account where the UUT is about to be launched. Confirmation of the actual first day will be required from the managers or trustees not later than the date on which a tax return is required for the first period of account.

HMRC response to an application – regulation 6

If HMRC ask for additional information to consider an application it must issue a notice requesting the information within 28 days of receiving the application. If an applicant does not respond to the notice within a further 28 days HMRC will not proceed with the application.

HMRC must give notice accepting or rejecting the application within 28 days of receiving either the application or additional information. A rejection of an application will give reasons for the decision.

Continuing requirements for approval as an EUUT – regulations 7-8

Once approved, an EUUT must satisfy several ongoing requirements:

● Appropriate arrangements must continue to be in place to ensure that all unit holders are eligible investors;

● The period of account of the UUT must not exceed 18 months;

● Accounts must be prepared in accordance with the Investment Association’s Statement of Recommended Practice (SORP) or its principles as they relate to determining revenue and capital;

● The accounts must be audited by a qualified independent auditor to confirm that they have been prepared in accordance with the SORP or its principles as they relate to determining revenue and capital;

● The managers or trustees must deliver a return for each period of account together with a copy of the trust’s accounts and a computation linking the accounts to the return; and

● The managers or trustees must confirm for each period of account that all unit holders are eligible investors when they deliver the return.

The accounts, computation and statement of eligible investors should normally accompany the return but will be accepted in practice if they are received by the latest day for making the self-assessment return (normally the 31 January following the year of assessment).

HMRC has published form CISC12 “Annual filing requirements for an exempt unauthorised unit trust” to help EUUTs fulfil all these requirements. Form CISC12 is available from the Gov.uk website.

HMRC may give notice withdrawing approval if they are satisfied the continuing requirements for approval are not met or if the managers or trustees request them to do so. Withdrawal of approval will have effect as from the date specified in the notice.

Appeal against rejection of application or withdrawal of approval – regulation 9

An UUT may appeal if an application is rejected or HMRC withdraw approval. Notice of appeal must be given within a period of 42 days beginning on the day on which the notice of rejection or withdrawal is given. The tribunal may make a decision to uphold or quash the rejection or withdrawal.