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HMRC internal manual

Savings and Investment Manual

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Collective investment schemes: unauthorised unit trusts: exclusions

Excluded schemes

A number of types of unauthorised unit trust scheme are excluded from the tax rules in Part 9 Chapter 9 ITA07. The Income Tax (Definition of Unit Trust Scheme) Regulations 1988 (SI988/267) exclude

  • Enterprise Zone Property Unit Trust schemes
  • Charitable unit trusts
  • Limited partnerships
  • Approved profit sharing schemes.

Limited partnerships and approved profit sharing schemes were already excluded from the definition of a unit trust scheme for Capital Gains Tax purposes and this treatment was continued by the Capital Gains Tax (Definition of Unit Trust Scheme) Regulations 1988 (SI1988/266).

Charitable unit trusts

Certain unit trust schemes, which are themselves charitable, are excluded from the Income Tax treatment for unit trusts and this means that the funds involved can continue to distribute income to their unit holders without deduction of tax. They remain Unit Trust schemes for Capital Gains Tax but will of course also continue to be eligible for exemption from CGT under either TCGA92/S100 (2) (exempt unit holders - see CG41352) or TCGA92/S256 (charities).

Limited partnerships

Limited partnerships established as investment vehicles may constitute unit trust schemes if the partnership property is held on trust for the partners. Such schemes are excluded from both the Income Tax and Capital Gains Tax treatment for unit trusts provided that they are UK limited partnerships; namely those registered under the Partnership Act 1907. These partnerships therefore continue to be dealt with as any other partnership (see CG27290).

Approved profit sharing schemes

Profit sharing schemes which have been approved under Part I of ICTA88/SCH9 are excluded from both the Income Tax and Capital Gains Tax definitions of unit trust schemes and their treatment continues as before. Share option schemes approved under Part I ICTA88/SCH9 are generally excluded from the definition of unit trust schemes in FISMA 2000.

Pension funds pooling schemes

The Income Tax (Pension Funds Pooling Schemes) Regulations 1996 (SI1996/1585) exclude another type of unauthorised unit trust scheme from the rules in Part 9 Chapter 9 ITA07. The type of scheme affected is a pension funds pooling scheme which is broadly a pooled investment fund specialising in managing the assets of United Kingdom exempt approved pension schemes and, in general terms, their overseas equivalents.

Pension funds pooling schemes are also excluded from the definition of a unit trust scheme for Capital Gains Tax purposes by the Capital Gains Tax (Pension Funds Pooling Schemes) Regulations 1996 (SI1996/1583). The effect of the Regulations is to disapply the tax rules for unauthorised unit trusts which would otherwise apply to such schemes and their investors.

Referrals

The Collective Investment Schemes Centre, Sheffield will determine whether schemes come within the above exemptions In any case where exclusion from the definition of an unauthorised unit trust is claimed, and where the criteria for an unauthorised unit trust (see SAIM6050) are present, the matter should be referred to the Collective Investment Schemes Centre, Sheffield for consideration.