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HMRC internal manual

Savings and Investment Manual

Collective investment schemes: unauthorised unit trusts: enterprise zone schemes: taxation of investors

Taxation of investors in Enterprise Zone Property scheme

The scheme trustee agrees each investor’s share of expenditure, income, etc. with Charities, Assets and Residence (Trusts) Truro, but it is the responsibility of the investor to claim capital allowances on expenditure on buildings or plant and machinery, and to return any income or balancing charges. The certificate provided by the trustee will contain agreed figures and will form the basis of his claim or return. But failure by the trustees does not relieve the investor of his personal obligations.

The investor is treated as a lessor who has invested directly in the enterprise zone property and plant and machinery and is entitled to capital allowances in respect of the expenditure incurred. The certificate provided by the trustee will show his agreed share of expenditure on buildings or plant and machinery in EZP schemes on which capital allowances are due.

The HMRC office dealing with the claim may accept the certificate as evidence of the qualifying expenditure incurred, or may ask Charities, Assets and Residence (Trusts) Truro to verify the details in cases of doubt. In the event of a claim being made in a sum greater than that shown on the certificate (perhaps on the basis of the total investment) HMRC will ask the investor to refer back to the trustee for the explanation of the difference.

Balancing charges/allowances

An investor may incur a balancing charge or become entitled to an allowance if either

  • the trustee sells (or receives insurance, moneys etc for) a building or plant and machinery, or
  • the investor disposes of any part of his interest in the scheme by transfer or sale of his units.

The certificate provided to the investor by the trustee will show the parts of any proceeds attributable to his interest in the buildings or plant. If an investor disposes of his holding (or part of that holding) he is treated as having disposed of his interest in the buildings and plant (or a part of his interest in each of the buildings etc. if he sells only some of his units) for the purposes of determining any balancing adjustments. Since the sale proceeds will normally need to be apportioned to the various assets HMRC will normally apply the original apportionment of the investment (to land, qualifying buildings etc.).

Balancing adjustments may be due in cases where a certificate is not produced or if the rental income ceases or diminishes. The certificate will generally show the number of units held or amount invested. A reduced figure will indicate a disposal by the unit holder.


The certificate provided to the investor will give details of amounts of rental income on which he is chargeable as property income under Part 3 of ITTOIA05, as well as other income chargeable under Part 4 of ITTOIA05 (interest etc). These can be checked in cases of doubt with Charities, Assets and Residence (Trusts) Truro.

EZP schemes are long term investments (up to 25 years because of the possibility of balancing charges) with substantial reliefs in the first year. HMRC offices should ensure that the income and charges are brought into account over that period, together with capital gains tax charges on the disposal of units or the receipt of a capital distribution (CG57682).

Interest relief

Since investors in EZP schemes are treated as lessors who have invested directly in property etc in the Enterprise Zone any amount they borrow for the purpose of investment is treated as a loan obtained for such an investment. Interest paid on such a loan may therefore qualify for relief subject to the other conditions for relief in respect of a loan for a qualifying purpose being satisfied.