Finance Act 2022

Qualifying funds U.K.

9 (1) In this Schedule “qualifying fund” means a fund that meets the diversity of ownership condition.

(2) The diversity of ownership condition is met if—

(a) the fund is a collective investment scheme [F1 , or is an AIF that is not a collective investment scheme only by reason of it being a body corporate,] and—

(i) [F2 the fund meets or, if the fund is part of multi-vehicle arrangements, the arrangements meet] the conditions in regulation 75(2), (3) and (4)(a) of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) (genuine diversity of ownership condition), or

(ii) [F3 the fund or those multi-vehicle arrangements] would meet the condition in regulation 75(5) of those regulations, if regulation 75(4)(b) were omitted,

(b) the fund is not close (whether or not it is a collective investment scheme), or

(c) the fund is 70% controlled by category A investors.

(3) For the purpose of applying the conditions referred to in sub-paragraph (2)(a)(i) and (ii)—

[F4 (za) the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) have effect as if references to a fund included—

(i) multi-vehicle arrangements,

(ii) a collective investment scheme which is not an offshore fund, and

(iii) an AIF that is not a collective investment scheme only by reason of it being a body corporate (and which is not an offshore fund);]

(a) the condition in regulation 75(2) of [F5 those Regulations] is to be treated as met in relation to a fund [F6 or multi-vehicle arrangements] marketed before 1 April 2022 if the fund [F7 or multi-vehicle arrangements] has produced, and made available to HMRC, a statement prepared by the manager of the fund [F7 or multi-vehicle arrangements] which—

(i) specifies the intended categories of investor when the fund [F8 or multi-vehicle arrangements] was marketed,

(ii) confirms that, and describes how, the interests in the fund [F9 or multi-vehicle arrangements] were made widely available, and

(iii) confirms that, and describes how, interests in the [F10 fund or multi-vehicle arrangements] were marketed and made available in accordance with the requirements of regulation 75(4)(a) of those regulations (and that provision is to be read accordingly);

(b) the fact that (for any reason) the capacity of a fund [F11 or multi-vehicle arrangements] to receive investments is limited does not prevent regulation 75(3) of those regulations (including as it applies for the purposes of regulation 75(5) of those regulations) from being met.

(4) Sub-paragraph (3)(b) does not apply if—

(a) the limited capacity of the fund [F12 or multi-vehicle arrangements] to receive investments is fixed by the documents of the fund [F12 or multi-vehicle arrangements] (or otherwise), and

(b) a pre-determined number of specific persons, or specific groups of connected persons (within the meaning of section 1122 of CTA 2010 (“connected” persons)), make investments in the fund [F12 or multi-vehicle arrangements] that collectively exhausts all, or substantially all, of that capacity.

(5) To determine if a fund is close—

(a) in the case of a company [F13 that has share capital], determine whether it is a close company in accordance with the rules in Chapter 2 of Part 10 of CTA 2010 but—

(i) any person who would be regarded as a participator (for the purposes of that Part) only as a result of being a creditor of the fund in respect of a normal commercial loan (within the meaning it has in paragraph 3) is not to be regarded as a participator,

(ii) any interest a participator has as a creditor of the fund in respect of a normal commercial loan is not to be regarded as an interest of that participator,

(iii) as if paragraph (a) of section 450(3) of that Act were omitted,

(iv) paragraphs 5(5) and 6(5) and (6) of this Schedule apply for the purposes of determining the rights of participators in the fund as they apply for the purposes of determining relevant interests in a QAHC, and

(v) subject to the modifications set out in paragraph 46(2)(a) to (e) of Schedule 5AAA to TCGA 1992 (meaning of close company etc), or

(b) in the case of any other fund, make that same determination—

(i) as if the fund were a company [F14 that has share capital], and

(ii) as if the rights of the participants in the fund were shares in a company.

(6) In making a determination under sub-paragraph (5)(b), neither a manager of a fund nor a general partner in a limited partnership that is a collective investment scheme [F15 , or is an AIF that is not a collective investment scheme only by reason of it being a body corporate,] is to be regarded as having control of that fund or scheme unless that manager or partner would be treated as having control of it as result of satisfying a condition in section 450(3)(b) to (d) of CTA 2010 (whether alone or with other persons).

(7) A fund is 70% controlled by category A investors if a category A investor, or more than one category A investor between them, directly or indirectly possesses—

(a) 70% or more of the voting power in the fund,

(b) so much of the fund as would, on the assumption that the whole of the income of the fund were distributed among persons with interests in the fund, entitle that investor or those investors to receive 70% or more of the amount so distributed, and

(c) such rights as would entitle that investor or those investors, in the event of the winding up of the fund or in any other circumstances, to receive 70% or more of the assets of the fund which would then be available for distribution among persons with interests in it.

(8) For the purposes of sub-paragraph (7)—

(a) a category A investor indirectly possesses something if the investor possesses it through a body corporate or a series of bodies corporate;

(b) the interests of the participants in a category A investor that is a collective investment scheme that is transparent (within the meaning given by paragraph 6(7)) are to be treated as interests of the investor (instead of its participants) if that investor meets the diversity of ownership condition as a result of sub-paragraph (2)(a);

(c) in determining, for the purposes of sub-paragraph (7)(b) or (c), proportions of income or assets persons with an interest in the fund would be entitled to, ignore any interest any person has as a creditor of the fund in respect of a normal commercial loan (within the meaning it has in paragraph 3);

(d) paragraphs 5(5) and 6(5) and (6) apply for the purposes of determining the interests of persons in a fund as they apply for the purposes of determining relevant interests in a QAHC.

(9) For the purposes of sub-paragraphs (5)(a)(i) and (ii) (as they apply by virtue of sub-paragraph (5)(b)) and (8)(c), references to a creditor of a fund are to be treated, in the case of a fund that is a partnership, as not including any creditor who is a partner of that fund.

(10) In this paragraph—

• “fund” means a collective investment scheme or an AIF;

• “manager”, in relation to a fund, means—

  (a)

  any person who is the manager of the property that is the subject of or held by the fund, or

  (b)

  any other person who has, or is expected to have, day-to-day control of that property;

• [F16 “multi-vehicle arrangements” means arrangements comprising two or more funds under which an investor in one of those funds would reasonably regard that investment as an investment in the arrangements as a whole rather than exclusively in any particular fund].

Textual Amendments

F1 Words in Sch. 2 para. 9(2)(a) inserted (retrospectively) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 11(1)(a)(2)

F2 Words in Sch. 2 para. 9(2)(a)(i) substituted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 12(2)(a)

F3 Words in Sch. 2 para. 9(2)(a)(ii) substituted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 12(2)(b)

F4 Sch. 2 para. 9(3)(za) inserted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 12(3)(a)

F5 Words in Sch. 2 para. 9(3)(a) substituted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 12(3)(b)(i)

F6 Words in Sch. 2 para. 9(3)(a) inserted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 12(3)(b)(ii)

F7 Words in Sch. 2 para. 9(3)(a) inserted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 12(3)(b)(iii)

F8 Words in Sch. 2 para. 9(3)(a)(i) inserted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 12(3)(c)(i)

F9 Words in Sch. 2 para. 9(3)(a)(ii) inserted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 12(3)(c)(i)(ii)

F10 Words in Sch. 2 para. 9(3)(iii) substituted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 12(3)(c)(iii)

F11 Words in Sch. 2 para. 9(3)(b) inserted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 12(3)(d)

F12 Words in Sch. 2 para. 9(4) inserted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 12(4)

F13 Words in Sch. 2 para. 9(5)(a) inserted (retrospectively) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 11(1)(b)(i)(2)

F14 Words in Sch. 2 para. 9(5)(b)(i) inserted (retrospectively) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 11(1)(b)(ii)(2)

F15 Words in Sch. 2 para. 9(6) inserted (retrospectively) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 11(1)(c)(2)

F16 Words in Sch. 2 para. 9(10) inserted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 12(5)