The Authorised Investment Funds (Tax) (Amendment) Regulations 2006

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the Authorised Investment Funds Regulations 2006 (S.I. 2006/964) by inserting a new regulation 52A.

The new regulation applies if a participant is carrying on a banking business or any other business where a distribution from an authorised investment fund is treated as a trading receipt; if the participant, either alone or together with connected persons, owns units which represent rights to 50% or more of the net value of the authorised investment fund; and if the authorised investment fund makes a dividend distribution to such a participant in circumstances where there is some foreign tax suffered by the authorised investment fund which is eligible for double taxation relief. In such a case, an amount of tax equal to the participant’s portion of the foreign tax is treated as foreign tax and not as United Kingdom tax for the purposes of section 798A of the Income and Corporation Taxes Act 1988 (c. 1) (limits for credit on foreign tax: corporation tax on trade income) and of section 804C of that Act (insurance companies: allocation of expenses etc. in computations under Case I of Schedule D) to the extent that section 804C applies to business of a company which is not long-term business.

A full regulatory impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.