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HMRC internal manual

Savings and Investment Manual

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HM Revenue & Customs
Updated
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Collective investment schemes: unauthorised unit trusts: pension funds pooling schemes: introduction

Pension funds pooling schemes

Pension funds pooling schemes (PFPS) are excluded from the income tax definition of unit trust scheme. The consequences are as follows.

  • The participants and not the trustee are entitled to the income arising to the fund in proportion to their interest in the fund (determined by the size of each participant’s unit holding).
  • Participants are also entitled to any benefits under a double tax treaty which they would have were they to hold the investments directly rather than through the PFPS.
  • The participants and not the trustee are entitled to a share of any capital allowances which may be due in respect of any capital expenditure incurred, determined by the size of each participants’ unit holding (the participants are also responsible for any balancing adjustments). See SAIM6230 for details of the special rules that apply in cases where capital allowances are or may be made.
  • If any income tax is payable on the income arising to the participants, it is the participants and not the trustee who are responsible for payment.

Only those schemes that meet certain conditions are excluded from the income tax treatment of unit trusts. Those conditions include provision for entering into arrangements to agree with the officer who is dealing with the affairs of the PFPS a method of calculating the income, profits or gains arising to the PFPS and each participant’s share, entitlement to capital allowances and any balancing adjustments.

The Collective Investment Schemes Centre, Sheffield will advise on whether schemes come within the above exemption and that office deals with cases that do come within the definition.