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The Authorised Investment Funds (Tax) Regulations 2006

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PART 4U.K.THE TREATMENT OF PARTICIPANTS IN AUTHORISED INVESTMENT FUNDS

CHAPTER 1U.K.PRELIMINARY PROVISIONS

Structure of this PartU.K.

24.  The structure of this Part of these Regulations is as follows—

  • this Chapter contains preliminary provisions;

  • Chapter 2 contains provisions relating to the tax treatment of participants chargeable to income tax;

  • Chapter 3 contains provisions relating to the tax treatment of participants chargeable to corporation tax;

  • F1...

Textual Amendments

Funds excluded from the ambit of this PartU.K.

25.  This Part does not apply to an authorised investment fund if the fund—

(a)is a registered pension scheme within the meaning of Part 4 of the Finance Act 2004 M1, or

(b)is treated, under paragraph 1(1) of Schedule 36 to that Act, as having become such a scheme.

Marginal Citations

CHAPTER 2U.K.PARTICIPANTS CHARGEABLE TO INCOME TAX

Deduction of tax from interest distributions: generalU.K.

Deduction of tax where interest distributions madeU.K.

26.—(1) This regulation applies if an interest distribution is made for a distribution period to a participant chargeable to income tax.

(2) Any obligation to deduct a sum under section 349(2) of ICTA M2 is subject to the provisions of this regulation.

(3) In this Part the “deduction obligation” means the obligation specified in paragraph (2).

(4) The deduction obligation does not apply to the interest distribution if—

(a)the participant is a company;

(b)the participant consists of the trustees of a unit trust scheme;

(c)the reputable intermediary condition is met with respect to a participant on the distribution date (see regulation 27); [F2or]

(d)the residence condition is met with respect to a participant on the distribution date (see regulation 30); F3...

F3(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) But if the participant is a company which is the trustee of the trust to which (or under which) the interest distribution is made (or received), the deduction obligation is not excluded by virtue of paragraph (4)(a).

(6) In its application to an interest distribution to a participant in respect of accumulation units, the deduction obligation is an obligation to deduct a sum out of the amount being credited to scheme capital on the participant's behalf.

Textual Amendments

Marginal Citations

M2Section 349(2) was amended by paragraph 1(2) of Schedule 11 to the Finance Act 1991 (c. 31), paragraph 18 of Schedule 14 to the Finance Act 1996 (c. 8) and paragraph 148(2) of Schedule 1 to the Income Tax (Trading and Other Income) Act 2005 (c. 5).

The reputable intermediary conditionU.K.

The reputable intermediary conditionU.K.

27.—(1) The reputable intermediary condition is met with respect to a participant on the distribution date if conditions A to C are met.

(2) Condition A is that the interest distribution is paid on behalf of the participant to a company.

(3) Condition B is that the legal owner has reasonable grounds for believing that the participant is not ordinarily resident in the United Kingdom.

(4) Condition C is that the company mentioned in paragraph (2)—

(a)is subject to the EC Money Laundering Directive,

(b)is subject to equivalent non-EC provisions, or

(c)is a company which—

(i)is resident in a regulating country or territory, and

(ii)is an associated company of a company which is subject to paragraph (a) or (b).

The reputable intermediary condition: further provisionsU.K.

28.—(1) This regulation applies for the purposes of Condition C in regulation 27.

(2) A company is subject to the EC Money Laundering Directive if it is a credit institution or financial institution as defined by Article 1 of Directive 91/308/EEC, as amended by Directive 2001/97/EC.

(3) A company is subject to equivalent non-EC provisions if it is required by the law of any country or territory which is not a member State to comply with requirements similar to those which, under Article 3 of that Directive (as so amended), member States must ensure are complied with by credit institutions and financial institutions.

(4) A country or territory is a regulating country or territory if it either is a member State or imposes requirements similar to those which, under Article 3 of that Directive (as so amended), member States must ensure are complied with by credit institutions and financial institutions.

(5) A company is to be treated as another's associated company if it would be so treated for the purposes of Part 11 of ICTA (close companies) (see section 416 of that Act).

Consequences of reasonable but incorrect beliefU.K.

29.—(1) This regulation applies if conditions A to D are met.

(2) Condition A is that an interest distribution is made to a participant.

(3) Condition B is that the legal owner, in reliance on the reputable intermediary condition being met with respect to the participant, does not comply with the deduction obligation in relation to the interest distribution.

(4) Condition C is that the deduction obligation would apply but for the reputable intermediary condition being met.

(5) Condition D is that (contrary to the belief of the legal owner) the participant is in fact ordinarily resident in the United Kingdom.

(6) Section 350 of ICTA M3 (charge to tax where payments made under section 349) and Schedule 16 to that Act M4 (collection of income tax on company payments which are not distributions) have effect as if the deduction obligation applied.

Marginal Citations

M3Section 350 was amended by paragraph 8 of Schedule 6 to the Finance Act 1996 and section 96(2) of the Finance Act 2002.

M4Schedule 16 was amended by section 149(3)(d) of the Finance Act 1989 (c. 26), Part II of Schedule 23 to the Finance Act 1996, section 91 of the Finance Act 1999 (c. 16) and paragraph 19 of Part 1 of Schedule 3 to the Debt Arrangement and Attachment (Scotland) Act 2002 (asp. 17).

The residence conditionU.K.

The residence conditionU.K.

30.—(1) The residence condition is met with respect to a participant on the distribution date if any of conditions A to E is met.

(2) Condition A is that, in relation to an interest distribution which is not made to or received under a trust, there is a valid declaration, made by the participant, that the participant is not ordinarily resident in the United Kingdom.

(3) Condition B is—

(a)that the participant holds the units as the personal representative of a deceased person, and

(b)that the deceased, before his death, made a declaration, valid at the time of his death, that he was not ordinarily resident in the United Kingdom.

(4) Condition C is—

(a)that the participant holds the units as the personal representative of a deceased person, and

(b)that the personal representative has made a declaration that the deceased, immediately before his death, was not ordinarily resident in the United Kingdom.

(5) Condition D is that, in the case of an interest distribution made to or received under a trust where the whole of the income is, or falls to be treated as, or under any provision of the Tax Acts is deemed to be, the income of a person other than the trustees of that trust, there is a valid declaration, made by the person in question that he is either not ordinarily resident or, in the case of a company, not resident in the United Kingdom.

(6) Condition E is that, in circumstances in which condition D does not apply and with respect to a participant in the case of an interest distribution made to or received under a trust, there is a valid declaration, made by the trustees of that trust that—

(a)the trustees are not resident in the United Kingdom, and

(b)each beneficiary of the trust is either not ordinarily resident or, in the case of a beneficiary which is a company, not resident in the United Kingdom.

Residence declarationsU.K.

31.—(1) A declaration made for the purposes of regulation 30 must—

(a)be in such form as may be required or authorised by the Commissioners;

(b)be made in writing to the legal owner of the authorised investment fund in question; and

(c)contain any details or undertakings required by paragraphs (2) to (4) below.

(2) A declaration made for the purposes of condition A or B in regulation 30 must contain—

(a)the name and principal residential address of the person making it; and

(b)an undertaking that he will notify the legal owner if he becomes ordinarily resident in the United Kingdom.

(3) A declaration made for the purposes of condition C in regulation 30 must contain the name of the deceased and his principal residential address immediately before his death.

(4) A declaration made for the purposes of condition D or E in regulation 30 must contain—

(a)the names and principal residential addresses of the trustees of the trust or, in the case of a trustee which is a company, the name of the company and the address of its registered or principal office;

(b)the names and principal residential addresses of the beneficiaries of the trust or, in the case of a beneficiary which is a company, the name of the company and the address of its registered or principal office; and

(c)an undertaking that the trustees of the trust will notify the legal owner of the authorised investment fund in question if—

(i)they become resident in the United Kingdom,

(ii)any beneficiary of the trust named in the declaration becomes ordinarily resident or, in the case of a company, resident in the United Kingdom, or

(iii)any person who becomes a beneficiary of the trust after the making of the declaration either is at the time of becoming a beneficiary, or subsequently becomes, ordinarily resident or, in the case of a company, resident in the United Kingdom.

References to beneficiaries in regulations 30 and 31U.K.

32.  In regulations 30 and 31 references to a beneficiary are references to any person who is known to the trustees of the trust to be either—

(a)a person who is or will or may become, entitled to any income of the trust, whether in the form of income or not, or

(b)a person to whom any such income may be paid, or for whose benefit any such income may be applied, whether in the form of income or not, in the exercise of a discretion by them.

Interest distributions: the position of the legal ownerU.K.

33.—(1) For the purposes of determining whether an interest distribution should be made with or without any deduction, the legal owner is entitled to treat a declaration made for the purposes of regulation 30 as valid.

(2) But the legal owner may not treat a declaration as valid if condition A or B is met.

(3) Condition A is that the legal owner receives a notification in compliance with an undertaking under regulation 31 that a person in question has become resident or ordinarily resident in the United Kingdom.

(4) Condition B is that the legal owner comes into possession of information by some other means which indicates that such a person is or may be resident or ordinarily resident in the United Kingdom.

The non-liability conditionU.K.

The non-liability conditionU.K.

F434.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Qualifying certificatesU.K.

F435.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

The contents conditionU.K.

F436.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

The supplier conditionU.K.

F437.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

The time limit conditionU.K.

F438.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

The continuing validity conditionU.K.

F439.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

The qualifying circumstances conditionU.K.

F440.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

The joint holding conditionU.K.

F441.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Qualifying certificates valid for only part of jointly held accounts: introductoryU.K.

F442.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Qualifying certificates valid for only part of jointly held accounts: the general ruleU.K.

F443.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Qualifying certificates valid for only part of jointly held accounts: further provisionsU.K.

F444.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Consequences of notice under regulation 39(6)U.K.

F445.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Qualifying certificate not in writingU.K.

F446.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

[F5Annual payments to non-residentsU.K.

Textual Amendments

F5Regs. 46A, 46B and cross-heading inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2013 (S.I. 2013/1772), regs. 1(1), 2(2)

Annual Payments – duty to deduct income taxU.K.

46A.—(1) An annual payment made to a participant which meets the conditions in paragraphs (2) to (6) is not a qualifying annual payment for the purposes of Chapter 6 of Part 15 of ITA 2007 (deduction from annual payments and royalties).

(2) The payment must be charged to income tax under Chapter 7 of Part 5 of ITTOIA 2005 (annual payments not otherwise charged).

(3) The payment must be made in respect of the participant’s interest in an authorised investment fund other than a Property AIF.

(4) The payment and the amount of the payment must be directly or indirectly referable to, and must not be more than, any management fees paid to the manager of the authorised investment fund in respect of the participant’s interest in the fund.

(5) Any management fees must not exceed an amount representing a reasonable commercial amount in all the circumstances.

(6) At the time the payment is made, the person making the payment must have reasonable grounds for believing that the participant is not resident in the United Kingdom.

Consequences of reasonable but incorrect beliefU.K.

46B.—(1) This regulation applies if—

(a)an annual payment is made to a participant without a sum representing income tax on the payment being deducted from it,

(b)at the time the payment is made, the condition in regulation 46A(6) is met,

(c)the payment would be a qualifying annual payment but for that condition being met, and

(d)at the time the payment is made, the participant is resident in the United Kingdom.

(2) Section 900 (deduction from commercial payments made by individuals) and section 901 (deduction from annual payments made by other persons) of ITA 2007 apply as if the payment were a qualifying annual payment.]

CHAPTER 3U.K.PARTICIPANTS CHARGEABLE TO CORPORATION TAX

Interest distributionsU.K.

The obligation to deduct taxU.K.

47.—(1) This regulation applies if an interest distribution is made for a distribution period to a participant chargeable to corporation tax.

(2) The deduction obligation does not apply to the interest distribution.

(3) But if the participant is a company which is the trustee of the trust to which (or under which) the interest distribution is made (or received), the deduction obligation is not excluded by virtue of paragraph (2).

(4) In its application to an interest distribution to a participant in respect of accumulation units, the deduction obligation is an obligation to deduct a sum out of the amount being invested on the participant's behalf.

Dividend distributionsU.K.

GeneralU.K.

48.—(1) Paragraph (2) applies if—

(a)a dividend distribution for a distribution period is made to a participant by the legal owner of an authorised investment fund, and

(b)on the distribution date for that distribution period the participant is within the charge to corporation tax.

(2) [F6Subject to paragraphs (2A)[F7, (2B) and (2BA)],] for the purpose of computing the corporation tax chargeable upon the participant, the unfranked part of the dividend distribution is treated—

(a)as an annual payment and not as a dividend distribution or an interest distribution; and

(b)as having been received by the participant after deduction of [F8tax at a rate equal to the basic rate of income tax] for the [F9tax year] in which the distribution date falls, from a corresponding gross amount.

[F10(2A) But paragraph (2) does not apply to a dividend distribution to which [F11Chapter 2 of Part 3 of CTA 2009] applies [F12unless the dividend distribution is made to—

(a)an insurance company in respect of any non-BLAGAB long-term business carried on by it, or

(b)an insurance special purpose vehicle that is not an insurance company in respect of any long-term business carried on by it that does not consist wholly of PHI business.

Expressions used in paragraph (a) or (b) have the same meaning as they have in Part 2 of FA 2012].

(2B) If, on the distribution date, the participant is the manager of the authorised investment fund, paragraph (2) shall not apply to the extent that the rights in respect of which the dividend distribution is made are held by him in the ordinary course of the manager’s business as manager of the fund.]

[F13(2BA)  Paragraph (2)(b) does not apply to so much of any dividend distribution as on a just and reasonable apportionment is attributable to an unallowable arrangement.

(2BB)  For the purposes of paragraph (2BA), an unallowable arrangement is an arrangement the main purpose or one of the main purposes of which is to secure that an amount of tax, or an increased amount of tax, is treated as deducted under paragraph (2)(b).

(2BC)  In paragraph (2BB), “arrangement” includes any arrangement, agreement, scheme, transaction, series of transactions or understanding (whether or not legally enforceable).]

[F14(2C) Regulation 48A makes provision in relation to the unfranked part of the dividend distribution treated as an annual payment under paragraph (2)(a) and regulation 48B makes provision in relation to the tax treated as deducted under paragraph (2)(b).]

(3) Regulation 49 explains how to calculate the unfranked part of the dividend distribution.

[F15(4) This regulation does not apply in respect of a holding in a qualified investor scheme if the scheme has not met the genuine diversity of ownership condition in regulation [F169A] in relation to an accounting period.]

Textual Amendments

F7Words in reg. 48(2) substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2012 (S.I. 2012/519), regs. 1(1), 5(2)

F8Words in reg. 48(2)(b) substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2010 (S.I. 2010/1642), regs. 1(1), 4(2)

F11Words in reg. 48(2A) substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2010 (S.I. 2010/294), regs. 1(1), 14

F13Reg. 48(2BA)-(2BC) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2012 (S.I. 2012/519), regs. 1(1), 5(3)

F14Reg. 48(2C) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2010 (S.I. 2010/1642), regs. 1(1), 4(3)

[F17Income treated as an annual payment treated as foreign incomeU.K.

48A.  If there is a foreign element of the tax treated as deducted under regulation 48(2)(b) (see regulation 48B), a corresponding proportionate part of the distribution which is treated as an annual payment under regulation 48(2)(a) is treated as if it were income that—

(a)arises in a territory of the kind mentioned in regulation 48B(3)(a), and

(b)is income by reference to which the tax treated under that provision as payable was computed.

Textual Amendments

F17Regs. 48A, 48B inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2010 (S.I. 2010/1642), regs. 1(1), 5

Tax treated as deducted from a dividend distributionU.K.

48B.—(1) The tax treated as deducted under regulation 48(2)(b) (“the deemed deduction”) is treated as income tax.

(2) But paragraph (1) does not apply to any foreign element of the deemed deduction.

(3) Instead, for the purposes of the Tax Acts the foreign element of the deemed deduction is treated as if it were tax—

(a)payable under the law of a territory outside the United Kingdom with which there are not in force any arrangements under section 2(1) of TIOPA 2010 (double taxation relief by agreement),

(b)calculated by reference to income arising or any chargeable gain accruing, in the territory, and

(c)corresponding to United Kingdom corporation tax.

(4) The amount of the foreign element of the deemed deduction is the amount, if any, by which the participant’s portion of the legal owner’s liability to corporation tax in respect of the gross income is reduced by any relief which is given, or falls to be given by way of a credit under section 18 of TIOPA 2010 (entitlement to credit for foreign tax reduces UK tax by amount of the credit).

(5) For the purposes of paragraph (4) the participant’s portion shall be determined by reference to the proportions in which participants have rights in the authorised investment fund in the distribution period in question.]

Textual Amendments

F17Regs. 48A, 48B inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2010 (S.I. 2010/1642), regs. 1(1), 5

Calculation of unfranked part of dividend distributionU.K.

49.—(1) This is how to calculate the unfranked part of the dividend distribution—

(2) In paragraph (1)—

  • U = the unfranked part of the dividend distribution to the participant;

  • A = the amount of the dividend distribution;

  • [F18C = such amount of the gross income as derives from income in respect of which the legal owner is charged to corporation tax, as reduced by—

    (a)

    any amount carried forward from an earlier accounting period and allowed as a deduction in computing the legal owner’s liability to corporation tax for the accounting period in which the last day of the distribution period falls, and

    (b)

    an amount equal to the legal owner’s net liability to corporation tax in respect of the gross income.]

  • D = the amount of the gross income, as reduced by an amount equal to the legal owner's net liability to corporation tax in respect of the gross income.

F19(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) Any reference in this regulation to the legal owner's net liability to corporation tax in respect of the gross income is a reference to the amount of the liability of the legal owner to corporation tax in respect of that gross income less the amount (if any) of any reduction of that liability which is given or falls to be given in accordance with any arrangements having effect by virtue of section 788 of ICTA (relief by agreement with other territories) or by way of a credit under section 790(1) of that Act (unilateral relief).

Textual Amendments

F18Words in reg. 49(2) substituted (with effect in accordance with reg. 1(3) of the amending S.I.) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2012 (S.I. 2012/519), regs. 1(1), 6(2)

F19Reg. 49(2A) omitted (with effect in accordance with reg. 1(3) of the amending S.I.) by virtue of The Authorised Investment Funds (Tax) (Amendment) Regulations 2012 (S.I. 2012/519), regs. 1(1), 6(3)

References to gross incomeU.K.

[F2050.  For the purposes of this Chapter, references to gross income are references to the net revenue before taxation determined in accordance with the Statement of Recommended Practice.]

Textual Amendments

F20Reg. 50 substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2010 (S.I. 2010/294), regs. 1(1), 15 (with reg. 24)

[F21Participants chargeable to corporation tax: holdings in qualified investor schemes where scheme does not meet the genuine diversity of ownership conditionU.K.

51.—(1) This regulation applies if—

(a)a participant has a holding in a qualified investor scheme, and

(b)the scheme has not met the genuine diversity of ownership condition in regulation [F229A] in relation to an accounting period.

(2) Section 212 of TCGA 1992 (annual deemed disposal of holdings of unit trusts etc.) does not apply to the participant in relation to that accounting period.

(3) Paragraph 4 of Schedule 10 to FA 1996 (company holdings in unit trusts and offshore funds) shall not apply to the participant in relation to that accounting period.]

Textual Amendments

Repayments of taxU.K.

F2352.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F23Reg. 52 omitted (with effect in accordance with reg. 1(2) of the amending S.I.) by virtue of The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2010 (S.I. 2010/1642), regs. 1(1), 6

Companies carrying on general insurance business: treatment of certain amounts of tax as foreign taxU.K.

F2452A.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F24Reg. 52A omitted (with effect in accordance with reg. 1(2) of the amending S.I.) by virtue of The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2010 (S.I. 2010/1642), regs. 1(1), 7

[F25Diversely owned AIFs and financial traders: treatment of shares and unitsU.K.

52B.—(1) This regulation and regulation 52C apply if a financial trader has held, or holds, shares or units in a diversely owned AIF.

(2) In computing the trading profits or losses of the financial trader for the relevant period, the following amounts must be brought into account—

(a)all distributions received by or credited to the financial trader in respect of such shares or units for the relevant period; and

(b)any amount required to be brought into account under regulation 52C.

(3) In this regulation and in regulation 52D(2) references to distributions are subject to section 130 of CTA 2009 (insurers receiving distributions etc).

(4) In this regulation and in regulations 52C and 52D—

“relevant period” means—

(a)

in the case of a financial trader within the charge to corporation tax, an accounting period, and

(b)

in the case of a financial trader within the charge to income tax, a period of account;

“financial trader” has the meaning given by regulation 52E.

Textual Amendments

Financial traders: amounts to be brought into account in respect of shares or units held in diversely owned AIFsU.K.

52C.—(1)  The only amounts that are to be brought into account in computing the trading profits or losses in respect of the shares or units in the diversely owned AIF for the relevant period are—

(a)amounts that are brought into account in accordance with Cases 1 to 4, and

(b)amounts within regulation 52B(2)(a).

This is subject to section 130 of CTA 2009 (insurers receiving distributions etc) and regulation 52D.

(2) Case 1 applies if the financial trader held the shares or units in a diversely owned AIF at the beginning of the relevant period and holds those shares or units throughout that period.

Where Case 1 applies, the amount to be brought into account is the difference between the market value of the shares or units at the end of the immediately preceding relevant period and the market value of those shares or units at the end of the relevant period.

(3) Case 2 applies if a financial trader acquired shares or units in a diversely owned AIF during the relevant period and retains those shares or units throughout the relevant period.

Where Case 2 applies, the amount to be brought into account is the difference between the market value of the shares or units at the end of the relevant period and the acquisition cost of those shares or units.

(4) Case 3 applies if the financial trader held shares or units in a diversely owned AIF at the beginning of the relevant period and disposes of those shares or units during that period.

Where Case 3 applies the amount to be brought into account is the difference between the market value of the shares or units at the end of the immediately preceding relevant period and the disposal value of the shares or units.

(5) Case 4 applies if the financial trader acquires shares or units in a diversely owned AIF during the relevant period and disposes of those shares or units during that period.

Where Case 4 applies the amount to be brought into account is the difference between the acquisition cost of the shares or units and the disposal value of those shares or units.

(6) In this regulation—

“acquisition cost” means the value of the consideration given for the acquisition of the shares or units;

“disposal value” means the value of the consideration received for the disposal of the shares or units;

“market value” means—

(a)

in the case of shares or units in a diversely owned AIF where both the buying and selling prices of units are published regularly by the manager of the fund, an amount equal to the buying price (that is the lower price) so published on any particular date or, if none were published on that date, on the latest date before;

(b)

in the case of shares or units in a diversely owned AIF where a single price is published regularly by the manager of the fund, the price so published on any particular date, or if none were published on that date, on the latest date before.

Textual Amendments

Shares and units not within regulation 52CU.K.

52D.—(1)  Regulation 52C does not apply in respect of any shares or units in a diversely owned AIF in relation to which—

(a)conditions A and B are both satisfied, or

(b)condition C is satisfied.

(2) Condition A is that the shares or units in the diversely owned AIF form part of the financial trader’s stock in trade and all the profits and losses, including distributions, arising in relation to the shares or units in the diversely owned AIF are included in the computation of the financial trader’s trading profits for the relevant period.

(3) Condition B is that the shares or units in the diversely owned AIF are accounted for under generally accepted accounting practice on the basis of fair value accounting.

(4) Condition C is that the shares or units in the diversely owned AIF are a relevant holding in respect of which the provisions of section 490 of CTA 2009 apply in relation to the financial trader.

(5) In paragraph (4) “relevant holding” means—

(a)any rights under a unit trust scheme;

(b)a material interest in an offshore fund; or

(c)any shares in an open-ended investment company.

Textual Amendments

Meaning of financial traderU.K.

52E.—(1)  In regulations 52B, 52C and 52D “financial trader” means a person who is carrying on a business which is—

(a)a banking business,

(b)an insurance business, or

(c)a business consisting wholly or in part of dealing in trading assets such that any profit on such assets would form part of the trading profits of that business.

This paragraph is subject to paragraphs (2) and (3).

(2) “An insurance business” in paragraph (1)(b) does not include life assurance business carried on by an insurance company and in the event that such a company carries on both life assurance business and any other insurance business that company will not be a financial trader in respect of the life assurance business.

(3) If—

(a)a financial trader, “A”, directly or indirectly transfers trading assets to a diversely owned AIF under or as part of an arrangement which has an unallowable purpose, and

(b)a connected person, “B”—

(i)holds shares or units in that diversely owned AIF at the time of the transfer; or

(ii)directly or indirectly acquires shares or units in that diversely owned AIF at a later time,

B is treated as being a financial trader in relation to those shares or units.

(4) In paragraphs (1) and (3) “trading assets” means—

(a)stocks or shares;

(b)a relevant contract within regulation 14G;

(c)a loan relationship within regulation 14L;

(d)units in a collective investment scheme within regulation 14M;

(e)securities within regulation 14F;

(f)foreign currency; or

(g)a carbon emission trading product within regulation 14N,

a profit on the sale of which would form part of the trading profits of the financial trader.

(5) An arrangement includes any scheme, understanding or transaction of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions.

(6) An arrangement has an unallowable purpose if the main purpose or one of the main purposes for either A or B being party to the arrangement is to obtain a tax advantage or an income tax advantage for any person.

(7) In paragraph (6)—

“tax advantage” has the meaning given by section of 840ZA of ICTA; and

“income tax advantage” has the meaning given by section 683 of ITA 2007.]

Textual Amendments

CHAPTER 4U.K.CHARGE TO TAX ON SUBSTANTIAL QIS HOLDINGS IN QUALIFIED INVESTOR SCHEMES

GeneralU.K.

Charge to tax under this ChapterU.K.

F2653.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Meaning of “substantial QIS holding”U.K.

F2654.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Amount charged to tax under this ChapterU.K.

F2655.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Measuring dates and meaning of “chargeable measuring date”U.K.

F2656.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

How tax is charged under this Chapter: income taxU.K.

F2657.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

How tax is charged under this Chapter: corporation taxU.K.

F2658.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Further provisionsU.K.

F2659.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

The first measuring dateU.K.

The general ruleU.K.

F2660.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Cases affected by the coming into force of these RegulationsU.K.

F2661.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Cases involving the launch of qualified investor schemesU.K.

F2662.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Cases where a participant's holding becomes substantialU.K.

F2663.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Definition of the “first measuring date”U.K.

F2664.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Calculation to be made on the first measuring dateU.K.

F2665.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Disposals of holdingsU.K.

Reorganisations etc.U.K.

F2666.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Disposal of part of a substantial QIS holdingU.K.

F2667.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Disposal of the whole of a substantial QIS holdingU.K.

F2668.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

No gain/no loss disposalsU.K.

F2669.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

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