IFM10240 - Exempt unauthorised unit trust (EUUT): Income

Introduction

EUUTs are required to file a return for each tax year and the income of a tax year is taken to be the income of the EUUT arising in the basis period for the tax year. In practice most EUUTs will prepare accounts for consecutive periods of 12 months and in this case the basis period for a tax year will be the period of account ending in that tax year. There are special rules for basis periods in other circumstances. For example, where a period of account exceeds 12 months or in other cases it may be necessary to allocate income to more than one basis period. See regulation 11 of SI 2013/2819.

If income arises to the trustees of an EUUT, it is treated as income of the trustees and not of the unit holders and is chargeable to income tax at the basic rate. Where capital expenditure is incurred it is the trustees (and not the unit holders) of an EUUT that are treated as the persons entitled to any allowance or charge under any provision relating to relief for capital expenditure.

Basis periods

The income of an EUUT for a tax year is the income arising in a basis period for the tax year. IFM10242 explains how to establish the basis period.

Disapplication of reliefs against income – regulation 12

Income arising to an EUUT is income of the trustees of the EUUT and several tax reliefs are disapplied (see regulation 12 of SI 2013/2819).

Accrued income profits – regulation 14

Special provisions apply where an EUUT invests in securities within the accrued income scheme (see Chapter 2 of Part 12 of ITA 2007). The income from such securities shown in the accounts will be charged to tax as if it were accrued income profits – see SAIM4000.

Disposal of interest in offshore non-reporting fund: reporting condition and qualifying index

IFM10245 explains the special rules which may apply to EUUTs when they dispose of interests in offshore non-reporting funds.

Treatment of investment transactions carried out by EUUTs – regulation 24

An EUUT can rely on the Investment Transactions (Tax) Regulations 2014 (SI 2014/685) (known colloquially as the “investment transactions list”), which lists transactions that will always be treated as investment transactions (and so not trading transactions). See IFM18000.