SAIM6080 - Collective investment schemes: unauthorised unit trusts: non- investment income and expenses and chargeable gains

Non-investment income

The trust may receive other income from transactions associated with investments, such as, incidental fees or commissions from underwriting or sub-underwriting. These will normally be taxable as miscellaneous income under Part 5 of ITTOIA05, or, if the activities amount to trading, under Part 2.

Capital allowances

Capital allowances may be relieved only against the income of the trustees. There is no ‘transparency', so allowances (or surplus allowances) may not be passed to the unit holders. Similarly, any balancing charges are assessable on the trustees. See, however, SAIM6150 onwards for more on Enterprise Zone Property Schemes and Pension Funds Pooling Schemes, which are excluded from the provisions of Part 9 Chapter 9 of ITA07.

Management expenses

The trust deed may provide that expenses are met by the unit holder directly or by set-off, or may provide for these to be paid out of the deposited property or income of the trust. Whatever method is adopted, the trustees are not entitled to any deduction.

Capital gains

ITA07/S504 does not affect the treatment of capital gains on disposal of trust assets. These are assessable to Capital Gains Tax on the trustees (see CG41351). In practice many unauthorised unit trusts are entitled to exemption by virtue of TCGA92/S100 (2) on the basis that, throughout the income tax year concerned, all of the unit holders would themselves be exempt from tax on chargeable gains, other than by reason of non-residence, on the disposal of their units in the trust (see CG41353).