Part 6Relationships treated as loan relationships etc

Chapter 3OEICs, unit trusts and offshore funds

Holdings in OEICs, unit trusts and offshore funds treated as creditor relationship rights

490Holdings in OEICs, unit trusts and offshore funds treated as creditor relationship rights

(1)

This section applies if—

(a)

at any time in an accounting period of a company it holds—

(i)

any shares in an open-ended investment company,

(ii)

any rights under a unit trust scheme, or

(iii)

a material interest in an offshore fund, and

(b)

there is a time in the period when that company, scheme or fund fails to meet the qualifying investments test (see section 493).

(2)

The Corporation Tax Acts have effect for the accounting period in accordance with subsections (3) and (4) as if the relevant holding were rights under a creditor relationship of the company.

(3)

The credits and debits to be brought into account for the purposes of Part 5 in respect of the company's relevant holdings are to be determined on the basis of fair value accounting.

(4)

But a credit relating to distributions of an open-ended investment company or authorised unit trust which become due and payable in an accounting period is only to be brought into account for that period if they are interest distributions.

(5)

In subsection (4) “interest distributions” has the meaning given by regulations made under section 17(3) of F(No.2)A 2005.

(6)

In this section and sections 491 and 492 “relevant holding” means a holding within subsection (1)(a).

(7)

But arrangements that are investment bond arrangements for the purposes of Chapter 6 of this Part or are within section 48A of FA 2005 (alternative finance arrangements: alternative finance investment bond: introduction) are not treated as such a holding.

(8)

See section 18(2)(c)(i) of F(No.2)A 2005 (section 17(3): specific powers) for the power to modify “relevant holding” for the purposes of this section and section 492 by regulations under section 17(3) of that Act (regulations about authorised unit trusts and OEICS).