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HMRC internal manual

Savings and Investment Manual

Collective investment schemes: unauthorised unit trusts: non- investment income and expenses and chargeable gains

Non-investment income

The trust may receive other income from transactions associated with investments, suchas, incidental fees or commissions from underwriting or sub-underwriting. These willnormally be taxable as miscellaneous income under Part 5 of ITTOIA05, or, if theactivities amount to trading, under Part 2.

Capital allowances

Capital allowances may be relieved only against the income of the trustees. There is no‘transparency’, so allowances (or surplus allowances) may not be passed to the unitholders. Similarly, any balancing charges are assessable on the trustees. See, however, SAIM6150 onwards for more on Enterprise Zone Property Schemes andPension Funds Pooling Schemes, which are excluded from the provisions of Part 9 Chapter 9of ITA07.

Management expenses

The trust deed may provide that expenses are met by the unit holder directly or byset-off, or may provide for these to be paid out of the deposited property or income ofthe trust. Whatever method is adopted, the trustees are not entitled to any deduction.

Capital gains

ITA07/S504 does not affect the treatment of capital gains on disposal of trust assets.These are assessable to Capital Gains Tax on the trustees (see CG41351). In practice manyunauthorised unit trusts are entitled to exemption by virtue of TCGA92/S100 (2) on thebasis that, throughout the income tax year concerned, all of the unit holders wouldthemselves be exempt from tax on chargeable gains, other than by reason of non-residence,on the disposal of their units in the trust (see CG41353).