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HMRC internal manual

Savings and Investment Manual

Collective investment schemes: unauthorised unit trusts: enterprise zone schemes: tax definition

Definition of an Enterprise Zone Property scheme

The characteristics of an Enterprise Zone Property scheme are set out in Regulation 4of the Income Tax (Definition of Unit Trust Scheme) Regulations 1988 (SI988/267), andapply to schemes established on or after 18 February 1988.

Assets must consist of land and buildings

The assets must consist only of land (including buildings on the land) wholly orsubstantially in an enterprise zone though there is provision for land outside theboundary which adjoins land within the boundary. Cash may also be held but only if heldtemporarily pending acquisition of property or distribution or in connection with themanagement of the scheme.

From 31 March 1992, the assets may also include land which was formerly situated in anenterprise zone where the buildings on that land were constructed and the constructionexpenditure was incurred (or incurred under a contract entered into) during the life ofthe zone. This covers the situation where buildings in an expired zone are purchased butthe buildings fully qualify for enterprise zone allowance.

Investors’ contributions must be the purchase of interests in land and buildings

The contributions of the investors may only be expended on the construction or purchaseof interests in buildings or structures which qualify for relief under Chapter I of Part ICapital Allowances Act 2001, integral plant and machinery and the land itself, thoughexpenditure on incidental matters is also permitted.

Terms of the scheme

The terms of the scheme must be that

  • all the contributions must be made and the expenditure must be incurred in a single year;
  • all investors have the same rights;
  • there is no redemption etc facility other than by way of distribution of capital to all the investors;
  • the trustee is to undertake certain responsibilities and to provide certain information to the Inspector dealing with the scheme.