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HMRC internal manual

Savings and Investment Manual

HM Revenue & Customs
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Collective investment schemes: unauthorised unit trusts: introduction

Unauthorised unit trusts

A unit trust is a collective investment scheme created by deed where the scheme property is held on trust for the investors. As with other collective investment schemes, investors ‘pool’ their money and invest in a professionally managed portfolio of assets. Unit trusts may have additional descriptive titles, indicating special investment objectives, for example, ‘money market funds’, ‘funds of funds’, ‘futures and options funds’, ‘umbrella funds’, etc.

ITA07/S1007 defines a ‘unit trust scheme’ in terms of the Financial Services and Markets Act 2000 (FSMA2000). This is a wide definition but there are regulatory powers under which the Treasury may provide that certain schemes will not be regarded as unit trust schemes. (See SAIM6160 onwards for excluded schemes).

ITA07/S989 defines an unauthorised unit trust as any unit trust scheme which is not an authorised unit trust or an umbrella scheme (SAIM6020). The Collective Investment Schemes Centre, Sheffield deals with the taxation of all unauthorised unit trusts except Enterprise Zone Property Schemes (see SAIM6160).

HMRC offices should submit any scheme that has all the following characteristics to he Collective Investment Schemes Centre Sheffield.

  • It consists of arrangements with respect to ‘property of any description’, including money, that enable investors (participants) to participate in or receive profits or income arising from the investment.
  • The participants do not have day to day control over the management of the investment.
  • The contributions of the participants and profits, or income are pooled (generally the participants will have no title to any particular assets but will have an interest in all the assets), and/or the investment is managed as a whole by the operator of the scheme.
  • The scheme is operated by way of business.
  • The investment property is held on trust for the participants - in some cases there may be a formal appointment of a trustee by way of a deed. In other cases, the terms of the contract may effectively establish a trustee/beneficiary relationship.