The Authorised Investment Funds (Tax) Regulations 2006

PART 1 U.K. PRELIMINARY PROVISIONS AND INTERPRETATION

Preliminary provisions U.K.

Citation, commencement and effect U.K.

1.—(1) These Regulations may be cited as the Authorised Investment Funds (Tax) Regulations 2006, and shall come into force on 1st April 2006.

(2) These Regulations have effect—

(a) for the purposes of income tax—

(i) for the tax year 2006-07 and subsequent tax years, and

(ii) for distributions made on or after 6th April 2006;

(b) for the purposes of corporation tax—

(i) on income, for accounting periods beginning on or after 1st April 2006,

(ii) on chargeable gains, in relation to disposals made on or after 1st April 2006, and

(iii) for distributions made on or after 1st April 2006; and

(c) for the purposes of capital gains tax, in relation to disposals made on or after 6th April 2006.

F1 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Reg. 1(3) revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(a)

Structure of these Regulations U.K.

2.  The structure of these Regulations is as follows—

• this Part contains preliminary provisions and provides for interpretation;

• Part 2 deals with the tax treatment of authorised investment funds;

• Part 3 deals with distributions made by authorised investment funds;

• Part 4 deals with the treatment of participants in authorised investment funds;

• [F2 Part 4A deals with Property AIFs;]

• Part 5 deals with compliance;

• Part 6 contains further provisions relating to authorised investment funds;

• Part 7 contains consequential amendments and modifications of enactments; and

• Part 8 contains final provisions.

Textual Amendments

F2 Words in reg. 2 inserted (6.4.2008) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2008 (S.I. 2008/705), regs. 1, 3

Interpretation U.K.

Definition of “authorised investment funds” U.K.

3.  In these Regulations “ authorised investment funds” means—

(a) open-ended investment companies, and

(b) authorised unit trust schemes.

Definition of “open-ended investment company” U.K.

4.  In these Regulations “ open-ended investment company” means a company incorporated in the United Kingdom to which section 236 of FISMA 2000 M1 applies.

Marginal Citations

M1 2000 c. 8.

Interpretation of expressions relating to authorised unit trust schemes U.K.

5.—(1) In these Regulations “ unit trust scheme” has the meaning given by section 237 of FISMA 2000.

(2) For the purposes of these Regulations a unit trust scheme is authorised in relation to an accounting period if an order under section 243 of FISMA 2000 is in force in relation to that scheme during the whole or part of that accounting period.

(3) In these Regulations “unit holder” means a person entitled to a share of the investments subject to the trusts of a unit trust scheme.

Further definitions generally relevant for authorised investment funds U.K.

6.—(1) In these Regulations the “ legal owner” means—

(a) in relation to an open-ended investment company, the open-ended investment company, and

(b) in relation to an authorised unit trust, the trustees of the trust.

(2) In these Regulations the “scheme property” means—

(a) in relation to an open-ended investment company, the property subject to the collective investment scheme constituted by the company, and

(b) in relation to an authorised unit trust, the property subject to the collective investment scheme constituted by the trust.

(3) In these Regulations the “manager” means—

(a) in relation to an open-ended investment company, the authorised corporate director, and

(b) in relation to an authorised unit trust, the person who is the manager of the trust for the purposes of Chapter 3 of Part 17 of FISMA 2000 (authorised unit trust schemes).

(4) In these Regulations, unless a contrary intention appears, “units” means the rights or interests (however described) of the participants in the authorised investment fund.

(5) In these Regulations “accumulation unit” means—

(a) in relation to an open-ended investment company, a share in the company in respect of which income is credited periodically to the capital part of the scheme property of the company, and

(b) in relation to an authorised unit trust, a unit in the trust in respect of which income is credited periodically to the capital part of the scheme property of the trust.

(6) In these Regulations a “participant”, in relation to an authorised investment fund, means a beneficial owner of units in the fund, except where the units are held on trust (other than a bare trust) or are comprised in the estate of a deceased person, and in such a case the participant, in relation to the fund, means the trustees of the trust, or, as the case may be, the deceased's personal representatives.

Umbrella companies and umbrella schemes: interpretation U.K.

7.—(1) In these Regulations “ umbrella company” has the meaning given by section 468A(4) of ICTA M2 , and a reference to a part of an umbrella company is to be construed in accordance with that provision.

(2) For the purposes of these Regulations each of the parts of an umbrella company is regarded as an open-ended investment company and the umbrella company as a whole shall not be so regarded.

(3) In relation to a part of an umbrella company, any reference—

(a) to investments or to scheme property of an open-ended investment company has effect as a reference to such of the investments or to such of the scheme property as under the arrangements form part of the separate pool to which that part of the umbrella company relates, and

(b) a person for the time being having rights in that part is regarded as the owner of shares in the open-ended investment company which that part is regarded as being by virtue of paragraph (2), and not as the owner of shares in the umbrella company itself.

(4) In relation to a part of an umbrella company, any references in these Regulations to the instrument of incorporation or the prospectus in issue for the time being (including any supplements to that prospectus) of an open-ended investment company have effect, for the purposes of these Regulations, as references to such parts of the instrument of incorporation or of that prospectus (including any supplements to that prospectus) as apply to that part of the umbrella company.

(5) In these Regulations “umbrella scheme” has the meaning given by section 468(8) of ICTA, and a reference to a part of an umbrella scheme is to be construed in accordance with that provision.

(6) For the purposes of these Regulations each of the parts of an umbrella scheme is regarded as an authorised unit trust and the umbrella scheme as a whole is not regarded as an authorised unit trust or as any other form of collective investment scheme.

(7) In relation to a part of an umbrella scheme, any reference—

(a) to investments or to scheme property subject to the trusts of an authorised unit trust has effect as a reference to such of the investments or to such of the scheme property as under the arrangements form part of the separate pool to which that part of the umbrella scheme relates, and

(b) to a unit holder, has effect as a reference to a person for the time being having rights in that separate pool.

(8) In relation to a part of an umbrella scheme, any references in these Regulations to the prospectus in issue for the time being (including any supplements to that prospectus) of an authorised unit trust have effect, for the purposes of these Regulations, as references to such parts of that prospectus (including any supplements to that prospectus) as apply to that part of the umbrella scheme.

Marginal Citations

M2 Section 468A was inserted by section 16 of the Finance (No. 2) Act 2005 (c. 22).

General interpretation U.K.

8.  In these Regulations—

“authorised corporate director”, in relation to an open-ended investment company, means a corporate director of the company acting in the capacity as the director having responsibility for the management of its scheme property, being an authorised person within the meaning given by section 31(2) of FISMA 2000, or if there is no such director, the person for the time being having responsibility for the management of the scheme property of the company and acting in that capacity;

“collective investment scheme” has the meaning given by section 235 of FISMA 2000;

the “Commissioners” means the Commissioners for Revenue and Customs;

“creditor relationship” has the meaning given by section 103(1) of FA 1996 M3 ;

“derivative contract” means—

(a)

a contract which is a derivative contract within the meaning of Schedule 26 to FA 2002 M4 , or

(b)

a contract which is, in the accounting period in question, treated as if it were a derivative contract by virtue of paragraph 36 of that Schedule M5 (contracts relating to holdings in unit trust schemes, open-ended investment companies and offshore funds);

“investments” do not include cash awaiting investment;

“net asset value” means the value of the assets of the authorised investment fund, after the deduction of specified liabilities;

“owner of shares”, in relation to an open-ended investment company, means a beneficial owner of shares in the company, except where the shares are held on trust (other than a bare trust) or are comprised in the estate of a deceased person, and in such a case the owner of shares, in relation to the company, means the trustees of the trust, or, as the case may be, the deceased's personal representatives;

“reporting date” means the final day of each annual and each half-yearly accounting period of the authorised investment fund;

“residence declaration” is to be construed in accordance with regulation 31;

“tax year”—

(a)

in relation to income tax, means a year of assessment within the meaning of ICTA (see section 832(1) of that Act), and

(b)

in relation to capital gains tax, means a year of assessment within the meaning of TCGA 1992 (see section 288(1) of that Act).

Marginal Citations

M3 1996 c. 8.

M4 2002 c. 23.

M5 Paragraph 36 of Schedule 26 was amended by paragraph 62 of Schedule 10 to the Finance Act 2004 (c. 12).

Abbreviations and general index U.K.

9.—(1) The Schedule to these Regulations (which contains abbreviations and defined expressions that apply for the purposes of these Regulations) has effect.

(2) Part 1 of the Schedule gives the meaning of the abbreviated references to Acts used in these Regulations.

(3) Part 2 of the Schedule lists the places where expressions used in these Regulations are defined or otherwise explained—

(a) in these Regulations for the purposes of these Regulations, or

(b) in these Regulations for the purposes of a Part or Chapter of these Regulations.

PART 2 U.K. THE TAX TREATMENT OF AUTHORISED INVESTMENT FUNDS

Loan relationships and derivative contracts: exclusion of capital profits, gains or losses U.K.

General rule for loan relationships: exclusion of capital profits, gains or losses U.K.

10.—(1) This regulation applies if any profits, gains or losses arising to an authorised investment fund from a creditor relationship in an accounting period are capital profits, gains or losses.

(2) For the purposes of Chapter 2 of Part 4 of FA 1996 M6 (loan relationships) those profits, gains or losses must not be brought into account as credits or debits.

(3) Regulation 12 explains what is meant by “capital profits, gains or losses” in the case of an authorised investment fund that prepares accounts in accordance with UK generally accepted accounting practice.

Marginal Citations

M6 1996 c. 8.

General rule for derivative contracts: exclusion of capital profits, gains or losses U.K.

11.—(1) This regulation applies if any profits, gains or losses arising to an authorised investment fund from a derivative contract in an accounting period are capital profits, gains or losses.

(2) For the purposes of Schedule 26 to FA 2002 M7 (derivative contracts) those profits, gains or losses must not be brought into account as credits or debits.

(3) Regulation 12 explains what is meant by “capital profits, gains or losses” in the case of an authorised investment fund that prepares accounts in accordance with UK generally accepted accounting practice.

Marginal Citations

M7 2002 c. 23.

Accounts prepared in accordance with UK generally accepted accounting practice U.K.

12.—(1) In the case of an authorised investment fund that prepares accounts in accordance with UK generally accepted accounting practice, capital profits, gains or losses arising from a creditor relationship in an accounting period, or capital profits, gains or losses arising from a derivative contract in an accounting period, are such profits, gains or losses as fall to be dealt with under—

(a) the heading “net gains/losses on investments during the period”, or

(b) the heading “other gains/losses”,

in the statement of total return for the accounting period.

(2) For the purposes of paragraph (1), the statement of total return for an accounting period is the statement of total return which, in accordance with the Statement of Recommended Practice used for the accounting period, must be included in the accounts contained in the annual report of the authorised investment fund which deals with the accounting period.

(3) For the purposes of paragraph (2), “Statement of Recommended Practice” means—

(a) in relation to any accounting period for which it is required or permitted to be used, the Statement of Recommended Practice relating to authorised investment funds issued by the Investment Management Association [F3 in December 2005], as from time to time modified, amended or revised; or

(b) in relation to any accounting period for which it is required or permitted to be used, any subsequent Statement of Recommended Practice relating to authorised investment funds, as from time to time modified, amended or revised.

Textual Amendments

F3 Words in reg. 12(3)(a) substituted (6.4.2008) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2008 (S.I. 2008/705), regs. 1, 4

Loan relationships: treatment of interest distributions and deficits U.K.

Treatment of interest distributions for purposes of loan relationships U.K.

13.—(1) Chapter 2 of Part 4 of FA 1996 (loan relationships) has effect in relation to an authorised investment fund and to an interest distribution paid by that fund as it would have effect if the interest distribution were interest payable on a loan to the authorised investment fund and were, accordingly, interest under a loan relationship to which the authorised investment fund were a party.

(2) For the purposes of these Regulations, an interest distribution is treated as paid if it is credited to the capital part of the scheme property of an authorised investment fund on behalf of a participant in respect of the participant's accumulation units.

(3) This regulation is subject to regulation 14.

Treatment of deficits on loan relationships U.K.

14.  Section 83(2)(c) of FA 1996 (carrying back of non-trading deficit on loan relationships) shall not have effect in relation to the loan relationships of an authorised investment fund (so that, accordingly, if for any accounting period there is a deficit on the loan relationships of the authorised investment fund, the deficit may not be carried back to be set off against profits for earlier accounting periods).

PART 3 U.K. DISTRIBUTIONS MADE BY AUTHORISED INVESTMENT FUNDS

Preliminary U.K.

Interpretation U.K.

15.—(1) In these Regulations a reference to a “ distribution” includes crediting an amount to the capital part of the scheme property of an authorised investment fund on behalf of a participant in respect of the participant's accumulation units.

(2) In these Regulations “distribution period”, in relation to an authorised investment fund, means a period by reference to which the total amount available for distribution to participants is ascertained.

(3) In these Regulations “distribution accounts”, in relation to an authorised investment fund, means accounts showing—

(a) the total amount available for distribution to participants, and

(b) how that total amount is computed.

(4) In these Regulations the “distribution date” for a distribution period of an authorised investment fund means—

(a) the date specified by or in accordance with the terms of the trust or the instrument of incorporation of the company for any distribution for that distribution period, or

(b) if no date is specified, the last day of that distribution period.

Funds excluded from the ambit of this Part U.K.

16.  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 M8 , or

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

Marginal Citations

M8 2004 c. 12.

Distribution accounts: general U.K.

Contents of distribution accounts U.K.

17.—(1) The total amount shown in the distribution accounts as available for distribution to participants must be shown as available for distribution in one of the following ways—

(a) it may be shown as available for distribution as yearly interest (see regulations 18 to 21 below); or

(b) it may be shown as available for distribution as dividends (see regulation 22 below).

(2) The following may not be included in any amount shown in the distribution accounts as available for distribution as yearly interest—

(a) amounts chargeable to corporation tax under Schedule A;

(b) amounts chargeable to corporation tax as income of an overseas property business (see section 70A(4) of ICTA M9 ).

Marginal Citations

M9 Section 70A was inserted by paragraph 25 of Schedule 5 to the Finance Act 1998 (c. 36).

Interest distributions U.K.

Interest distributions: general U.K.

18.—(1) Paragraph (2) applies where the total amount shown in the distribution accounts as available for distribution to participants is shown as available for distribution as yearly interest.

(2) The Tax Acts shall have effect as if the total amount were payments of yearly interest made on the distribution date by the authorised investment fund to the participants in proportion to their rights.

(3) In these Regulations an “interest distribution” means a payment of yearly interest treated as made by virtue of paragraph (2) (including a payment of interest treated as made to a participant who is not chargeable to income tax).

(4) This regulation is subject to—

(a) regulation 19 (the qualifying investments test), and

(b) regulation 23 (treatment of de minimis amounts).

The qualifying investments test U.K.

19.—(1) No amount may be shown as available for distribution as yearly interest unless the authorised investment fund in question satisfies the qualifying investments test throughout the distribution period.

(2) An authorised investment fund satisfies the qualifying investments test throughout a distribution period (the “relevant period”) if, at all times in that period, the market value of the qualifying investments exceeds 60% of the market value of all the investments of the fund.

(3) Regulations 20 and 21 deal with the meaning of the expression “qualifying investments”.

Meaning of “qualifying investments” U.K.

20.  In these Regulations “ qualifying investments”, in relation to an authorised investment fund, means the investments of that fund which fall within any of the following categories (read, as appropriate, with any applicable provision in regulation 21)—

Category 1

Money placed at interest.

Category 2

Securities.

Category 3

Shares in a building society.

Category 4

Qualifying units in another authorised investment fund.

Category 5

Derivative contracts whose underlying subject matter consists wholly of any one or more of the matters referred to in categories 1 to 4 and currency.

Category 6

Contracts for differences whose underlying subject matter consists wholly of any one or more of interest rates, creditworthiness and currency.

Category 7

Derivative contracts not within categories 5 or 6 where there is a hedging relationship between the derivative contract and an asset within categories 1 to 4.

Category 8

Alternative finance arrangements.

Meaning of “qualifying investments”: further provisions U.K.

21.—(1) This regulation applies for the purposes of regulation 20.

(2) For the purposes of category 2 “securities” do not include shares in a company.

(3) For the purposes of category 4 units in another authorised investment fund are qualifying units at any time in the relevant period if, and only if, the other authorised investment fund would itself (on the relevant assumption) satisfy the qualifying investments test throughout that period.

(4) For the purposes of paragraph (3) the relevant assumption is that the only investments of the other authorised investment fund which are to be regarded as qualifying investments are those falling within categories 1 to 3 and 5 to 8.

(5) In paragraph (4) references to investments of an authorised investment fund—

(a) in the case of an open-ended investment company are references to investments comprised in the scheme property of that company, but do not include references to cash awaiting investment, and

(b) in the case of an authorised unit trust are references to investments subject to the trusts of that authorised unit trust, but do not include references to cash awaiting investment.

(6) For the purposes of categories 5 and 6 “underlying subject matter” has the same meaning as in paragraph 11 of Schedule 26 to FA 2002 M10 .

(7) For the purposes of categories 5 and 6 underlying subject matter may consist of currency only if and to the extent that there is a hedging relationship between the contract and a qualifying investment falling within categories 1 to 4.

(8) In paragraph (7) “hedging relationship” has the meaning given by paragraph 12(14) of Schedule 26 to FA 2002 M11 .

(9) For the purposes of category 6 a “contract for differences” has the same meaning as in paragraph 12 of Schedule 26 to FA 2002 M12 .

(10) For the purposes of category 7 a fund has a hedging relationship between a derivative contract on the one hand (“the hedging instrument”) and an asset on the other (“the hedged item”) if and to the extent that—

(a) the hedging instrument and the hedged item are designated by the fund as a hedge, or

(b) in any other case the hedging instrument is intended to act as a hedge of the exposure to changes in fair value of a hedged item which is a recognised asset or an identified portion of such an asset that is attributable to a particular risk and could affect the total net return of the fund.

(11) For the purposes of category 8 “alternative finance arrangements” has the meaning given by section 46(1) of the Finance Act 2005 M13 .

Marginal Citations

M10 2002 c. 23. Paragraph 11 of Schedule 26 was amended by Article 12 of S.I. 2004/2201.

M11 Paragraph 12(14) of Schedule 26 to the Finance Act 2002 was added by Article 9 of S.I. 2005/646.

M12 Paragraph 12 of Schedule 26 to the Finance Act 2002 was amended by Article 13 of S.I. 2004/2201 and Article 9 of S.I. 2005/646.

M13 2005 c. 7.

Dividend distributions U.K.

Dividend distributions: general U.K.

22.—(1) Paragraph (2) applies where the total amount shown in the distribution accounts as available for distribution to participants is shown as available for distribution as dividends.

(2) The Tax Acts shall have effect as if the total amount were dividends on shares paid on the distribution date by the authorised investment fund to the participants in proportion to their rights.

(3) In these Regulations a “dividend distribution” means a dividend treated as paid by virtue of paragraph (2) (including a dividend treated as paid to a participant who is not chargeable to corporation tax).

(4) This regulation is subject to regulation 23 (treatment of de minimis amounts).

De minimis amounts U.K.

Provisions applying if amounts available for distribution are de minimis U.K.

23.—(1) An authorised investment fund is not treated as making a distribution for a distribution period if conditions A to D are met.

(2) Condition A is that, in accordance with rules made by the Financial Services Authority, the authorised investment fund has an agreed de minimis limit.

(3) Condition B is that the authorised investment fund—

(a) has prepared distribution accounts in which the amount shown as available for distribution to participants is a de minimis amount, and

(b) chooses to waive the distribution of that de minimis amount.

(4) Condition C is that the de minimis amount is carried forward to the next distribution period as an amount available for distribution to participants.

(5) Condition D is that none of the units of the authorised investment fund in issue on the distribution date are in bearer form.

(6) If this regulation applies, the authorised investment fund is not required to comply with the requirements of section 234A of ICTA M14 (information relating to distributions) in respect of the de minimis amount for the distribution period in question.

(7) In this regulation—

the “de minimis limit”, in relation to an authorised investment fund, means an amount in respect of which a distribution of income of the fund is not required if the total amount shown in the fund's distribution accounts as available for distribution to participants does not exceed that amount, and

“de minimis amount” means an amount falling within the de minimis limit.

Marginal Citations

M14 Section 234A was inserted by section 32(1) of the Finance (No. 2) Act 1992 (c. 48) and amended by paragraph 2(2) of Schedule 37 to the Finance Act 1996 (c. 8).

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

CHAPTER 1 U.K. PRELIMINARY PROVISIONS

Structure of this Part U.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;

• Chapter 4 imposes a charge to tax on substantial QIS holdings in qualified investor schemes.

Funds excluded from the ambit of this Part U.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 M15 , or

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

Marginal Citations

M15 2004 c. 12.

CHAPTER 2 U.K. PARTICIPANTS CHARGEABLE TO INCOME TAX

Deduction of tax from interest distributions: general U.K.

Deduction of tax where interest distributions made U.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 M16 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); [F4 or]

(d) the residence condition is met with respect to a participant on the distribution date (see regulation 30); F5 ...

F5 (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

F4 Word in reg. 26(4)(c) inserted (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 3

F5 Reg. 26(4)(e) and preceding word revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(b)

Marginal Citations

M16 Section 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 condition U.K.

The reputable intermediary condition U.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 provisions U.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 belief U.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 M17 (charge to tax where payments made under section 349) and Schedule 16 to that Act M18 (collection of income tax on company payments which are not distributions) have effect as if the deduction obligation applied.

Marginal Citations

M17 Section 350 was amended by paragraph 8 of Schedule 6 to the Finance Act 1996 and section 96(2) of the Finance Act 2002.

M18 Schedule 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 condition U.K.

The residence condition U.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 declarations U.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 31 U.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 owner U.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 condition U.K.

The non-liability condition U.K.

F6 34.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

Qualifying certificates U.K.

F6 35.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

The contents condition U.K.

F6 36.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

The supplier condition U.K.

F6 37.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

The time limit condition U.K.

F6 38.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

The continuing validity condition U.K.

F6 39.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

The qualifying circumstances condition U.K.

F6 40.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

The joint holding condition U.K.

F6 41.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

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

F6 42.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

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

F6 43.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

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

F6 44.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

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

F6 45.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

Qualifying certificate not in writing U.K.

F6 46.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Regs. 34-46 revoked (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 8(c)

CHAPTER 3 U.K. PARTICIPANTS CHARGEABLE TO CORPORATION TAX

Interest distributions U.K.

The obligation to deduct tax U.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 distributions U.K.

General U.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) 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 income tax at the lower rate for the year of assessment in which the distribution date falls, from a corresponding gross amount.

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

Calculation of unfranked part of dividend distribution U.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;

• C = such amount of the gross income as does not derive from franked investment income, as reduced by 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.

(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).

References to gross income U.K.

50.  For the purposes of this Chapter the references to the gross income are references to the gross income entered in the distribution accounts for the purpose of computing the total amount available for distribution to participants for the distribution period in question.

Cases where participant is the manager of the fund U.K.

51.  If on the distribution date the participant is the manager of the authorised investment fund, regulation 48(2) shall not apply in so far as the rights in respect of which the dividend distribution is made are held by him in the ordinary course of his business as manager of the fund.

Repayments of tax U.K.

52.—(1) This regulation applies if, in relation to a dividend distribution, any tax is treated as having been deducted by virtue of regulation 48(2)(b).

(2) The amount to which the participant is entitled by way of repayment of that tax must not exceed the amount of the participant's portion of the legal owner's net liability to corporation tax in respect of the gross income.

(3) In calculating the amount to which the participant is entitled by way of repayment of that tax, tax treated as having been deducted by virtue of regulation 48(2)(b) is set off in priority to any other tax under section 7(2) of ICTA and under paragraph 5 of Schedule 16 to that Act.

(4) For the purposes of paragraph (2) 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.

[F7 Banks and other financial traders: treatment of certain amounts of tax as foreign tax U.K.

52A.— [F8 (1) This regulation applies if—

(a) conditions A to C are met, and

(b) either condition D or E is met.]

(2) Condition A is that an authorised investment fund makes a dividend distribution to which regulation 48(2) applies.

(3) Condition B is that there is some foreign tax suffered by the authorised investment fund in respect of which relief 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).

(4) Condition C is that the dividend distribution is made to a participant carrying on—

(a) a banking business, or

(b) any other business where a distribution from an authorised investment fund is treated as a trading receipt.

(5) Condition D is that the participant, either alone or together with connected persons (and otherwise than as a nominee or bare trustee), owns units which represent rights to 50% or more of the net asset value of the authorised investment fund.

(6) But [F9 for the purposes of paragraph (5)] rights in an authorised investment fund held as assets of a company’s long-term insurance fund are not treated as held by the participant (either alone or together with connected persons) for the purposes of determining whether the participant owns units which represent rights to 50% or more of the net asset value of the authorised investment fund.

[F10 (6A) Condition E is that the participant is a financial trader who—

(a) owns units which represent rights to 10% or more of the net asset value of the authorised investment fund, and

(b) does not own those units as a nominee or bare trustee.]

(7) Section 839 of ICTA (connected persons) applies for the purposes of this regulation.

(8) For the purposes of the specified provisions, an amount of tax equal to the participant’s portion of the foreign tax mentioned in paragraph (3) is treated as foreign tax and not as United Kingdom tax.

(9) For the purposes of paragraph (8) 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.

(10) In paragraph (8) “the specified provisions” means—

(a) section 798A of ICTA (limits for credit on foreign tax: corporation tax on trade income), and

(b) section 804C of ICTA (insurance companies: allocation of expenses etc. in computations under Case I of Schedule D) to the extent that it applies to business of a company which is not long-term business.]

[F11 (11) In this regulation—

“financial trader” means a participant who meets condition C (see paragraph (4));

“long-term business” and “long-term insurance fund” have the same meanings as in Chapter 1 of Part 12 of ICTA (insurance companies etc.).]

Textual Amendments

F7 Reg. 52A inserted (7.12.2006) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2006 (S.I. 2006/3239), regs. 1, 2

F8 Reg. 52A(1) substituted (7.3.2007) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2007 (S.I. 2007/683), regs. 1, 2(2)

F9 Words in reg. 52A(6) inserted (7.3.2007) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2007 (S.I. 2007/683), regs. 1, 2(3)

F10 Reg. 52A(6A) inserted (7.3.2007) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2007 (S.I. 2007/683), regs. 1, 2(4)

F11 Reg. 52A(11) substituted (7.3.2007) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2007 (S.I. 2007/683), regs. 1, 2(5)

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

General U.K.

Charge to tax under this Chapter U.K.

53.—(1) A participant is charged to tax under this Chapter if the participant owns a substantial QIS holding in a qualified investor scheme.

(2) But a participant is excepted from the charge to tax under this Chapter if the participant is—

(a) a charity within the meaning of section 506(1) of ICTA;

(b) a registered pension scheme within the meaning of Part 4 of the Finance Act 2004 M19 ;

(c) a scheme which is treated, under paragraph 1(1) of Schedule 36 to the Finance Act 2004, as a registered pension scheme within the meaning of Part 4 of that Act;

(d) an insurance company within the meaning of section 431(2) of ICTA M20 holding the units in the qualified investor scheme as assets of its long-term insurance fund;

(e) a friendly society within the meaning of section 466(2) of ICTA M21 ;

(f) a person for whom any profit on a sale of the units in the qualified investor scheme would be treated as a trading profit of its trade; or

(g) a qualified investor scheme.

(3) In these Regulations a “qualified investor scheme” means a fund, authorised by the Financial Services Authority, in which a statement that the fund is a qualified investor scheme is included in the instrument constituting the scheme.

(4) In paragraph (2)(d) “long-term insurance fund” has the meaning given by section 431(2) of ICTA M22 .

Marginal Citations

M19 2004 c. 12.

M20 The definition of “insurance company” in section 431(2) was substituted by Article 26(3) of S.I. 2001/3629.

M21 The definition of “friendly society” in section 466(2) was substituted by paragraph 14(4) of Schedule 9 to the Finance (No. 2) Act 1992 (c. 48).

M22 The definition of “long-term insurance fund” was inserted (as “long term business fund”) by paragraph 1(2) of Schedule 6 to the Finance Act 1990 (c. 29), and amended by paragraphs 2(1)(b) and 2(2)(a) of Article 52 of S.I. 2001/3629.

Meaning of “substantial QIS holding” U.K.

54.—(1) For the purposes of this Chapter a participant owns a substantial QIS holding in a qualified investor scheme if the participant, either alone or together with associates or connected persons, (and otherwise than as a nominee or a bare trustee) owns units which represent rights to 10% or more of the net asset value of the fund.

This is without prejudice to what is meant by “substantial” where the word appears in other contexts.

(2) Section 417 of ICTA M23 applies for the purposes of this regulation to determine whether persons are associates.

(3) Section 839 of ICTA M24 (connected persons) applies for the purposes of this regulation.

(4) A participant who owns a substantial QIS holding in a qualified investor scheme continues to own a substantial QIS holding in that scheme until the date on which the whole of that holding is disposed of (so that, accordingly, it does not matter that the holding no longer represents 10% or more of the net value of the qualified investor scheme).

(5) Paragraph (4) is subject to regulation 63 (cases where a participant's holding becomes substantial).

Marginal Citations

M23 Section 417 was amended by paragraph 173 of Schedule 1 to the Income Tax (Trading and Other Income) Act 2005 (c. 5).

M24 Section 839 was amended by paragraph 20 of Schedule 17 to the Finance Act 1995 (c. 4) and by paragraph 340 of Schedule 1 to the Income Tax (Trading and Other Income) Act 2005.

Amount charged to tax under this Chapter U.K.

55.—(1) A participant is charged to tax under this Chapter by reference to the difference in value of a substantial QIS holding between two measuring dates (the “difference in value”).

(2) The difference in value is the amount given by the formula—

VLMD – VEMD

(3) In paragraph (2)—

• VLMD is the market value of the substantial QIS holding at the beginning of a chargeable measuring date (the “later measuring date”), and

• VEMD is the market value of the substantial QIS holding at the end of the previous measuring date (the “earlier measuring date”).

(4) In the case of units in a qualified investor scheme where both the buying and selling prices of units are published regularly by the manager of the scheme, “market value” means 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.

(5) In the case of units in a qualified investor scheme where a single price is published regularly by the manager of the scheme, “market value” means the price so published on any particular date, or if none were published on that date, on the latest date before.

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

56.—(1) Each of the following is a measuring date—

(a) the first measuring date (see regulation 64);

(b) in a case where a participant already owns a substantial QIS holding in a qualified investor scheme, the date on which the participant acquires additional units in the qualified investor scheme;

(c) any reporting date;

(d) the date on which there is a disposal of part of the substantial QIS holding (see regulation 67);

(e) the date on which there is a disposal of the whole of the substantial QIS holding (see regulation 68);

(f) the date of the participant's death.

(2) In this Chapter a “chargeable measuring date” means any measuring date other than the first measuring date.

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

57.—(1) This regulation applies in the case of a participant chargeable to income tax.

(2) The following amounts must be calculated—

(a) the difference in value calculated by reference to each chargeable measuring date falling within a tax year; and

(b) the aggregate amount of those differences in value.

(3) If the aggregate amount is a positive amount, the participant is charged to income tax under Chapter 8 of Part 5 of ITTOIA 2005 (income not otherwise charged) on that aggregate amount for that tax year.

(4) If the aggregate amount is a negative amount, the participant is treated as if—

(a) a loss of that aggregate amount had been sustained by the participant in a transaction, and

(b) this regulation were listed in Part 3 of the Table in section 836B M25 of ICTA.

Marginal Citations

M25 Section 836B was inserted by paragraph 340 of Schedule 1 to the Income Tax (Trading and Other Income) Act 2005 (c. 5).

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

58.—(1) This regulation applies in the case of a participant chargeable to corporation tax.

(2) The following amounts must be calculated—

(a) the difference in value calculated by reference to each chargeable measuring date falling within an accounting period; and

(b) the aggregate amount of those differences in value.

(3) If the aggregate amount is a positive amount, the participant is charged to corporation tax under Case VI of Schedule D on that aggregate amount for that accounting period.

(4) If the aggregate amount is a negative amount, the participant is treated as if a loss of that aggregate amount had been incurred by the participant in a transaction in respect of which the participant were within the charge to corporation tax under Case VI of Schedule D.

Further provisions U.K.

59.—(1) In this Chapter “ disposal” is to be construed in accordance with TCGA 1992, and cognate expressions are to be construed accordingly.

(2) The provisions of TCGA 1992 that apply to determine—

(a) the time at which a disposal and acquisition is made, and

(b) how assets disposed of are to be identified,

apply for the purposes of this Chapter in the same way as they apply for the purposes of that Act.

The first measuring date U.K.

The general rule U.K.

60.—(1) The general rule is that on the first date on which a participant who is within the charge to tax under this Chapter owns a substantial QIS holding in a qualified investor scheme, the participant must value his own holding in that scheme as at that date.

(2) The general rule is modified if any of the following regulations apply—

(a) regulation 61 (cases affected by the coming into force of these Regulations);

(b) regulation 62 (cases involving the launch of qualified investor schemes);

(c) regulation 63 (cases where a participant's holding becomes substantial).

Cases affected by the coming into force of these Regulations U.K.

61.—(1) This regulation applies if—

(a) a participant chargeable to income tax owns a substantial QIS holding in a qualified investor scheme on 6th April 2006, or

(b) a participant chargeable to corporation tax owns a substantial QIS holding in a qualified investor scheme on 1st April 2006.

(2) If on the measuring date first occurring after 30th June 2006 the participant does not own a substantial QIS holding in the qualified investor scheme, the participant is not required to value his own holding in that scheme as at 1st or 6th April 2006 (as the case may be).

(3) If on the measuring date first occurring after 30th June 2006 the participant owns a substantial QIS holding in the qualified investor scheme and is chargeable to income tax, the participant must value his own holding in that scheme as at 6th April 2006.

(4) If on the measuring date first occurring after 30th June 2006 the participant owns a substantial QIS holding in the qualified investor scheme and is chargeable to corporation tax, the participant must value its own holding in that scheme as at 1st April 2006.

Cases involving the launch of qualified investor schemes U.K.

62.—(1) This regulation applies if a qualified investor scheme is launched.

(2) If on the date immediately following the expiry of a period of twelve months beginning with the date of issue of the first prospectus of the scheme (“the qualification date”) the participant does not own a substantial QIS holding in the qualified investor scheme, the participant is not required to value his own holding in that scheme as at that date or any earlier date.

(3) If on the qualification date the participant owns a substantial QIS holding in the qualified investor scheme, the participant must value his own holding in that scheme as at the date on which the participant first owned a substantial QIS holding in the scheme.

Cases where a participant's holding becomes substantial U.K.

63.—(1) This regulation applies if, on any date, a participant owns a substantial QIS holding in a qualified investor scheme otherwise than as a result of the acquisition of units in that scheme.

(2) If on the next reporting date and the reporting date following it (“the second reporting date”) the participant does not own a substantial QIS holding in the qualified investor scheme, the participant—

(a) is not required to value his own holding in that scheme at any time, and

(b) is not treated as owning a substantial QIS holding in the scheme on the second reporting date or at any earlier time.

(3) If on the second reporting date the participant owns a substantial QIS holding in the qualified investor scheme, the participant must value his own holding in that scheme as at the date mentioned in paragraph (1) and as at each subsequent measuring date.

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

64.  In this Chapter the “ first measuring date” means the date on which, in accordance with regulation 60(1), 61(3) or (4), 62(3) or 63(3), the participant must value his own holding in the qualified investor scheme.

Calculation to be made on the first measuring date U.K.

65.  On the first measuring date the participant must calculate the chargeable gain or loss that would have accrued for the purposes of tax in respect of chargeable gains if, on that date, the participant had disposed of the substantial QIS holding for a consideration equal to its market value at that time.

Disposals of holdings U.K.

Reorganisations etc. U.K.

66.—(1) For the purposes of this Chapter, sections 116(10) and 127 of TCGA 1992 (reorganisations) do not apply to a substantial QIS holding in a qualified investor scheme; and a transaction which would otherwise have fallen within either of those provisions is treated as involving a disposal and subsequent acquisition of that holding.

(2) The consideration for the subsequent acquisition is a consideration equal to the market value of the holding immediately before the acquisition.

Disposal of part of a substantial QIS holding U.K.

67.—(1) This regulation applies if a participant disposes of part of a substantial QIS holding.

(2) The date on which the participant disposes of the part of the substantial QIS holding is a chargeable measuring date.

(3) For the purposes of tax in respect of chargeable gains a corresponding part of the chargeable gain or loss specified in regulation 65 is treated as accruing on the disposal.

(4) Subject to paragraph (3) and for the purposes of tax in respect of chargeable gains, the participant is treated as making the disposal for a consideration of such amount as would secure that neither a gain nor a loss would accrue to the participant.

(5) For the purposes of tax in respect of chargeable gains, this regulation does not affect the treatment of the other party to the transaction involving the part of the substantial QIS holding of which there has been a disposal.

(6) This regulation is subject to regulation 69 (no gain/no loss disposals).

Disposal of the whole of a substantial QIS holding U.K.

68.—(1) This regulation applies if a participant disposes of the whole of a substantial QIS holding.

(2) The date on which the participant disposes of the substantial QIS holding is a chargeable measuring date.

(3) For the purposes of tax in respect of chargeable gains—

(a) in a case where regulation 67 has applied on any earlier disposal of part of the substantial QIS holding, the remaining part of the chargeable gain or loss specified in regulation 65 is treated as accruing on the disposal, and

(b) in any other case, the whole of the chargeable gain or loss specified in regulation 65 is treated as accruing on the disposal.

(4) Subject to paragraph (3) and for the purposes of tax in respect of chargeable gains, the participant is treated as making the disposal for a consideration of such amount as would secure that neither a gain nor a loss would accrue to the participant.

(5) For the purposes of tax in respect of chargeable gains, this regulation does not affect the treatment of the other party to the transaction involving the substantial QIS holding.

(6) This regulation is subject to regulation 69 (no gain/no loss disposals).

No gain/no loss disposals U.K.

69.—(1) This regulation applies if, for the purposes of tax in respect of chargeable gains, any disposal of the whole or part of a substantial QIS holding falls within any of the following provisions of TCGA 1992—

(a) section 58(1) (transfers between spouses);

(b) section 62(4) (acquisition as legatee);

(c) section 139 (company reconstructions) M26 ;

(d) section 140A (transfers of a UK trade) M27 ;

(e) section 140E (merger leaving assets within the UK tax charge) M28 ;

(f) section 171(1) (transfers within a group) M29 .

(2) Regulation 67(3) or 68(3) (as the case may be) does not apply in relation to the disposal.

(3) On and after the date of the transfer, the transferee's holding in the qualified investor scheme is a substantial QIS holding in that scheme (whether or not the transferee's holding in that scheme (if any) was a substantial QIS holding in that scheme before that date).

(4) If the transferee disposes of the whole, or part, of the substantial QIS holding, the held-over gain or, as the case may be, a corresponding part of the held-over gain, is treated as accruing to the transferee on the disposal.

(5) In paragraph (4) “the held-over gain” means the chargeable gain or loss that would have accrued to the transferor if the disposal falling within paragraph (1) had been a disposal to which regulation 68(3) had applied.

Marginal Citations

M26 Section 139 was amended by section 251(5) of the Finance Act 1994 (c. 9), section 134(1) of the Finance Act 1998 (c. 36), paragraph 5 of Schedule 29 to the Finance Act 2000 (c. 17), Part 3(2) of Schedule 40 to the Finance Act 2002 (c. 23), paragraph 2(3) of Schedule 27 to the Finance Act 2003 (c. 14), and by Article 2(2)(d) of S.I. 1992/3066.

M27 Section 140A was inserted by section 44 of the Finance (No. 2) Act 1992 (c. 48) and amended by paragraph 2(3) of Schedule 27 to the Finance Act 2003 and section 59(3) of the Finance (No. 2) Act 2005 (c. 22).

M28 Section 140E was inserted by section 51(1) of the Finance (No. 2) Act 2005.

M29 Section 171(1) was substituted by paragraph 2(2) of Schedule 29 to the Finance Act 2000 (c. 17).

[F12 PART 4A U.K. PROPERTY AIFS

Textual Amendments

F12 Pt. 4A inserted (6.4.2008) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2008 (S.I. 2008/705), regs. 1, 5

CHAPTER 1 U.K. PRELIMINARY PROVISIONS

Property AIFs U.K.

69A.— (1) This Part enables an open-ended investment company which meets the conditions in regulations 69D to 69O—

(a) to benefit from the exemption from corporation tax in accordance with regulation 69Y(1), and

(b) to have liabilities to tax imposed on the company and on participants in accordance with Chapters 3, 4 and 5 of this Part.

(2) In these Regulations an open-ended investment company to which this Part applies may be referred to as a “Property AIF”.

Structure of this Part U.K.

69B.   The structure of this Part of these Regulations is as follows—

This Chapter contains preliminary provisions;

Chapter 2 deals with entry into and membership of the Property AIF regime;

Chapter 3 deals with the tax treatment of Property AIFs;

Chapter 4 deals with distributions made by Property AIFs;

Chapter 5 deals with the treatment of participants in Property AIFs;

Chapter 6 deals with compliance in relation to the Property AIF regime; and

Chapter 7 contains provisions relating to an open-ended investment company’s leaving the Property AIF regime.

Key concepts U.K.

69C.— (1) In this Part “entry” means the time when this Part begins to apply to an open-ended investment company.

(2) In this Part “cessation” means the time when this Part ceases to apply to an open-ended investment company.

(3) In this Part, in relation to an open-ended investment company—

(a) “F (pre-entry)” means the open-ended investment company before this Part begins to apply to it,

(b) “F (tax-exempt)” means the open-ended investment company in so far as it carries on property investment business (within the meaning of regulation 69F) while this Part applies to it,

(c) “F (residual)” means the open-ended investment company in so far as it carries on business other than property investment business while this Part applies to it, and

(d) “F (post-cessation)” means the open-ended investment company after this Part has ceased to apply to it.

CHAPTER 2 U.K. ENTRY INTO AND MEMBERSHIP OF THE PROPERTY AIF REGIME

Conditions of membership of the Property AIF regime U.K.

Conditions for this Part to apply to company U.K.

69D.   In order for this Part to apply to an open-ended investment company in respect of an accounting period, the following conditions must be met—

(a) the property investment business condition (see regulation 69E);

(b) the genuine diversity of ownership condition (see regulation 69J);

(c) the corporate ownership condition (see regulation 693K);

(d) the loan creditor condition (see regulation 694M);

(e) the balance of business conditions (see regulation 69N); and

(f) the notification condition (see regulation 69O).

The property investment business condition U.K.

The property investment business condition U.K.

69E.— (1) The property investment business condition is that the open-ended investment company must meet conditions A and B throughout the accounting period.

(2) Condition A is that the company’s instrument of incorporation and its prospectus (including any supplements to the prospectus) include a statement that the company’s investment objectives are—

(a) to carry on property investment business, and

(b) to manage cash raised from investors for investment in the property investment business.

(3) Condition B is that the company must carry on property investment business.

(4) In this Part “prospectus” includes any supplements to a prospectus.

Meaning of “property investment business” U.K.

69F.— (1) In this Part “property investment business” means business consisting of any one or more of—

(a) property rental business (see regulation 69H);

(b) owning shares in UK-REITs; and

(c) owning shares or units in an entity in circumstances in which conditions A to C are met.

(2) In these Regulations “UK-REIT” means a company or group to which Part 4 of FA 2006 applies.

(3) Condition A is that the entity is—

(a) a property company, or

(b) a unit trust scheme or similar contractual arrangement—

(i) which is not a collective investment scheme,

(ii) which has defined capital,

(iii) which is listed on a recognised stock exchange, and

(iv) where there is no obligation on the manager of the scheme to provide opportunities for redemption of the investment.

(4) Condition B is that the entity is not within the charge to corporation tax.

(5) Condition C is that the entity is equivalent to a UK-REIT in the jurisdiction in which the property company is incorporated, or (as the case may be) in the jurisdiction in which the unit trust scheme or similar contractual arrangement carries on business.

(6) For the purposes of paragraph (3)(a) a property company is not equivalent to a UK-REIT if—

(a) the shares forming the company’s ordinary share capital are not listed on a recognised stock exchange, or

(b) it is a company to which section 236 of FISMA 2000 applies.

(7) In this regulation “recognised stock exchange” has the meaning given by section 1005(1) of ITA 2007.

(8) This regulation is subject to the further provisions in regulation 69G.

Property investment business: further provisions U.K.

69G.— (1) If an open-ended investment company to which this Part applies receives a distribution from a UK-REIT—

(a) the distribution is income of F (tax-exempt) to the extent that the distribution represents business of C (tax-exempt) carried on by the UK-REIT, and

(b) the distribution is income of F (residual) to the extent that the distribution represents business other than business of C (tax-exempt) carried on by the UK-REIT.

(2) In paragraph (1) “C (tax-exempt)” shall be construed in accordance with Part 4 of the Finance Act 2006.

(3) If an open-ended investment company to which this Part applies receives a distribution from an entity within regulation 69F(1)(c), the distribution is income of F (tax-exempt) except to the extent that the distribution is identified, at the time at which it is made, as arising from any activity of the entity that is not property rental business.

(4) For the purposes of this Part an asset is involved in property investment business if—

(a) it is an estate, interest or right in or over land by the exploitation of which property rental business is conducted;

(b) it consists of shares owned by the open-ended investment company in a UK-REIT; or

(c) it consists of shares owned by the open-ended investment company in an entity within regulation 69F(1)(c).

Meaning of “property rental business” U.K.

69H.— (1) In this Part “property rental business” means—

(a) property rental business within the meaning given by section 104 of FA 2006, and

(b) the relevant business of an intermediate holding vehicle (see regulation 69I).

(2) For the purposes of paragraph (1)(b) the relevant business of an intermediate holding vehicle is its property rental business within the meaning given by section 104 of FA 2006, but disregarding subsection (1)(a) of that section.

(3) For the purposes of this Part an asset is involved in property rental business if—

(a) it is an estate, interest or right in or over land by the exploitation of which property rental business is conducted, or

(b) it consists of shares owned by the open-ended investment company in an intermediate holding vehicle.

Meaning of “intermediate holding vehicle” U.K.

69I.— (1) For the purposes of regulation 69H, an entity is an “intermediate holding vehicle” in an accounting period if it meets conditions A to F throughout the accounting period.

(2) Condition A is that the vehicle is a company, trust or partnership.

(3) Condition B is that the vehicle is not a collective investment scheme.

(4) Condition C is that the vehicle is wholly owned by the open-ended investment company (the “parent”) or another intermediate holding vehicle or series of intermediate holding vehicles wholly owned by the parent, unless and to the extent that local legislation or regulations relating to the intermediate holding vehicle holding the property specified in paragraph (5) requires a proportion of local ownership.

(5) Condition D is that the function of the intermediate holding vehicle is solely to enable the holding, by the parent, of estates, interests or rights in or over land outside the United Kingdom by the exploitation of which property rental business is conducted.

(6) Condition E is that the intermediate holding vehicle has its accounts consolidated with those of the parent.

(7) Condition F is that all property rental income of the intermediate holding vehicle (or the full proportion of that income representing the interest of the parent in the intermediate holding vehicle) must be reflected in the distribution accounts of the parent at the same time as that income is reflected in the accounts of the intermediate holding vehicle.

The genuine diversity of ownership condition U.K.

The genuine diversity of ownership condition U.K.

69J.— (1) The genuine diversity of ownership condition is that the open-ended investment company must meet conditions A to F throughout the accounting period.

This is subject to paragraphs (8) and (9).

(2) Condition A is that the company’s instrument of incorporation and prospectus in issue for the time being—

(a) contain a statement that shares in the company will be widely available, and

(b) specify the intended categories of investor.

(3) Condition B is that the specification of intended categories of investor referred to in paragraph (2)(b) does not have the effect of limiting the intended investors to a limited number of specific persons or specific groups of connected persons.

(4) Condition C is that shares in the company—

(a) must be marketed and made available sufficiently widely to reach the intended categories of investors, and

(b) must be marketed and made available in a manner appropriate to attract those categories of persons.

(5) Condition D is—

(a) that a person may easily acquire shares in the company, and may acquire the shares in the same way as a person may acquire shares or units in other authorised investment funds that are widely available, or

(b) in the case of a qualified investor scheme, that a person qualified to invest may, without difficulty, obtain information about the company and acquire shares in it.

(6) Condition E is that the minimum investment is not unreasonably high in view of the risk profile of the company or the intended categories of investors.

(7) Condition F is that, in comparison with charges imposed on larger investors, charges imposed on smaller investors will not be greater than is commercially normal and reasonable.

(8) The open-ended investment company meets the genuine diversity of ownership condition if—

(a) an investor in the company is a unit trust scheme (a “feeder fund”), and

(b) paragraphs (2) to (7) are met in relation to the company after taking into account the intended investors in the feeder fund.

(9) If paragraph (8) applies—

(a) the open-ended investment company and the feeder fund must have the same manager (or proposed manager),

(b) a notice under regulation 69O must be accompanied by the feeder fund’s trust deed and prospectus in issue, and

(c) paragraphs (7) and (8) of regulation 69P apply in relation to the feeder fund’s trust deed and prospectus as they apply to the open-ended investment company’s instrument of incorporation and prospectus (or, as the case may be, to the proposed company’s instrument of incorporation and prospectus).

(10) For the purposes of this regulation—

(a) sections 993 and 994 of ITA 2007 (connected persons) apply in the case of a person chargeable to income tax, and

(b) section 839 of ICTA (connected persons) applies in the case of a person chargeable to corporation tax.

The corporate ownership condition U.K.

The corporate ownership condition U.K.

69K.— (1) The corporate ownership condition is that the open-ended investment company must meet conditions A to C and (if applicable) condition D at the time that this Part begins to apply to the company and throughout the accounting period.

This is subject to regulation 69L(1).

(2) Condition A is that no body corporate is beneficially entitled (directly or indirectly) to 10% or more of the net asset value of the fund.

(3) Condition A is treated as met if—

(a) the company has taken reasonable steps to prevent a body corporate from acquiring a holding of 10% or more of the net asset value of the fund,

(b) a body corporate has nevertheless acquired such a holding,

(c) immediately upon becoming aware of the situation, the company has taken steps to ensure that the holding is reduced below 10% of the net asset value of the fund, and

(d) the company has continued, with all reasonable speed, to take steps to ensure that the holding is so reduced.

(4) Condition B is that the company’s instrument of incorporation and its prospectus include provisions under which any body corporate which becomes a shareholder in the company—

(a) must undertake not to acquire 10% or more of the share capital of the company, and

(b) must undertake, on becoming aware that it has acquired 10% or more of the share capital of the company, to reduce its holding of that share capital below 10%.

(5) Condition C is that the company’s instrument of incorporation and its prospectus include provisions under which a body corporate acquiring shares in the company must give a certificate in accordance with paragraph (6) or (7).

(6) The certificate is a certificate that the body corporate acquiring shares holds the shares as beneficial owner.

(7) The certificate is a certificate that the body corporate acquiring shares holds some or all of those shares otherwise than as a beneficial owner, but that the body corporate—

(a) holds less than 10% of the share capital of the company on behalf of itself or any one other corporate beneficial owner, and

(b) has obtained the undertakings in the terms specified in sub-paragraphs (a) and (b) of paragraph (4) from every other body corporate on whose behalf it owns shares in the company otherwise than as a beneficial owner.

(8) Condition D is that, in a case in which the body corporate acquiring shares in the company gives a certificate in accordance with paragraph (7), the body corporate acquiring the shares has undertaken to disclose the following information to the manager of the company if the manager so requires—

(a) the names of any body corporate on whose behalf the body corporate owns shares in the company otherwise than as a beneficial owner, and

(b) the extent of the holding of that body corporate in the company.

The corporate ownership condition: further provisions U.K.

69L.— (1) The open-ended investment company meets conditions B and C of the corporate ownership condition if it provides in its instrument of incorporation and its prospectus that a body corporate is prohibited from acquiring shares in the open-ended investment company.

(2) The open-ended investment company meets conditions B and C of the corporate ownership condition if—

(a) it provides in its instrument of incorporation and its prospectus that a body corporate is prohibited from acquiring shares in the open-ended investment company,

(b) a body corporate (“BC”) acquires shares in the open-ended investment company,

(c) BC does not hold those shares as beneficial owner, and

(d) BC gives a certificate in accordance with paragraph (3).

(3) The certificate is a certificate—

(a) that BC does not hold any of the shares in the open-ended investment company as beneficial owner, and

(b) that none of the beneficial owners of BC’s shares in the open-ended investment company is a body corporate.

(4) Paragraph (5) applies if the trustees of a unit trust scheme—

(a) hold shares in the open-ended investment company, and

(b) are chargeable, in the United Kingdom, either to income tax or to corporation tax in their capacity as trustees of that unit trust scheme.

(5) For the purposes of regulation 69K the trustees are treated as the beneficial owners of the shares; and a person holding units in the unit trust shall not be treated as beneficially entitled (directly or indirectly) to 10% or more of the net asset value of the open-ended investment company’s fund by virtue of holding the units.

(6) In this Part “body corporate” means—

(a) a body corporate incorporated under the laws of any part of the United Kingdom or any other territory, or

(b) an entity which is treated as a body corporate for tax purposes—

(i) in accordance with the law of a territory outside the United Kingdom with which relevant arrangements have been entered into, or

(ii) in accordance with an international agreement containing relevant arrangements.

(7) In paragraph (6) “relevant arrangements” means arrangements which—

(a) have been entered into with a view to affording relief from double taxation, and

(b) have effect by virtue of an Order in Council under section 788 of ICTA.

The loan creditor condition U.K.

The loan creditor condition U.K.

69M.— (1) The loan creditor condition is that the open-ended investment company must meet conditions A to C throughout the accounting period in the case of any loan relationship to which the company is party as debtor.

(2) Condition A is that, in the case of a debtor relationship of the company, the person standing in the position of a creditor as respects the debt in question is not entitled to an amount by way of interest which depends to any extent on—

(a) the results of all or part of the open-ended investment company’s business, or

(b) the value of any of the company’s assets.

(3) For the purposes of condition A, a loan shall not be treated as dependent on the results of the company’s business by reason only that the terms of the loan provide—

(a) for the interest to be reduced in the event of results improving, or

(b) for the interest to be increased in the event of results deteriorating.

(4) Condition B is that, in the case of a debtor relationship of the company, the person standing in the position of a creditor as respects the debt in question is not entitled to an amount by way of interest which exceeds a reasonable commercial return on the consideration lent.

(5) Condition C is that, in the case of a debtor relationship of the company, the person standing in the position of a creditor as respects the debt in question is entitled on repayment to an amount which—

(a) does not exceed the consideration lent, or

(b) is reasonably comparable with the amount generally repayable (in respect of an equal amount of consideration) under the terms of issue of securities listed on a recognised stock exchange.

(6) In this regulation “loan relationship” and “debtor relationship” shall be construed in accordance with Chapter 2 of Part 4 of FA 1996 (loan relationships).

The balance of business conditions U.K.

The balance of business conditions U.K.

69N.— (1) The balance of business conditions are that conditions A and B must be met.

(2) Condition A is that the net income of F (tax-exempt) for an accounting period (determined in accordance with regulation 69Z1) is—

(a) at least 40% of the open-ended investment company’s net income (as defined in regulation 69Z) where this Part applies to a newly qualified company in its first accounting period, or

(b) at least 60% of the open-ended investment company’s net income (as defined in regulation 69Z) where this Part applies to a company in an accounting period in any other circumstances.

(3) Condition B is that the value of the assets involved in property investment business is—

(a) at least 40% of the total value of the assets held by the open-ended investment company at the end of the accounting period where this Part applies to a newly qualified company in its first accounting period, or

(b) at least 60% of the total value of the assets held by the open-ended investment company at the end of the accounting period where this Part applies to a company in an accounting period in any other circumstances.

(4) For the purposes of condition B—

(a) assets must be valued in accordance with generally accepted accounting practice,

(b) where generally accepted accounting practice offers a choice of valuation between cost basis and fair value, fair value must be used, and

(c) no account shall be taken of liabilities secured against or otherwise relating to assets (whether generally or specifically).

(5) In this Part a “newly qualified company” means a company—

(a) to which this Part applies immediately upon its authorisation, and

(b) which has not been an authorised investment fund before that authorisation.

The notification condition U.K.

The notification condition U.K.

69O.— (1) The notification condition is that conditions A and B must be met.

(2) Condition A is—

(a) that the manager of an existing open-ended investment company has given notice for this Part to apply to the company, or

(b) if it is proposed to incorporate an open-ended investment company, that the person expected to become the manager of the open-ended investment company on its incorporation (the “applicant”) has given notice for this Part to apply to the company.

(3) Condition B is that the notice given under paragraph (2) has taken effect.

(4) If notice is given under paragraph (2)(a), the company must obtain any necessary shareholder and regulatory approvals to its instrument of incorporation and prospectus before giving the notice.

(5) If notice is given under paragraph (2)(b), the terms of the proposed company’s instrument of incorporation must be such that the proposed company, on its incorporation, will be required to meet—

(a) the property investment business condition (see regulation 69E), and

(b) the genuine diversity of ownership condition (see regulation 69J).

(6) In this Part—

the “applicant” means the person referred to in paragraph (2)(b),

an “existing company notice” means a notice given under paragraph (2)(a), and

a “future company notice” means a notice given under paragraph (2)(b).

Form and timing of notice under regulation 69O U.K.

69P.— (1) A notice under regulation 69O must be given in writing to the Commissioners.

(2) An existing company notice must be given at least 28 days before the beginning of the specified period.

This is subject to the following paragraphs of this regulation.

(3) A future company notice must be given at least 42 days before the date of the expected incorporation and authorisation.

This is subject to the following paragraphs of this regulation.

(4) A notice under regulation 69O may be withdrawn or amended at any time before it takes effect—

(a) by the manager (in the case of an existing company notice), or

(b) by the applicant (in the case of a future company notice).

(5) If a notice under regulation 69O is amended before it is due to take effect, regulation 69O shall apply to the amended notice.

(6) But if HM Revenue and Customs give notice that they are satisfied that the amended notice is valid, the amended notice shall take effect as if given on the date of the original notice.

(7) An existing company notice may be given at any time before the beginning of the specified period if—

(a) HM Revenue and Customs have given clearance under regulation 69U, and

(b) the manager of the open-ended investment company certifies that there have been no changes in substance between—

(i) the form in which the company’s instrument of incorporation and its prospectus were considered by HM Revenue and Customs before giving the clearance, and

(ii) the form in which it is proposed that those documents will apply at the beginning of the specified period.

(8) A future company notice may be given at any time before the proposed company is authorised and incorporated if—

(a) HM Revenue and Customs have given clearance under regulation 69U, and

(b) the applicant certifies that there have been no changes in substance between—

(i) the form in which the proposed company’s instrument of incorporation and its prospectus were considered by HM Revenue and Customs before giving the clearance, and

(ii) the form in which it is proposed that those documents will apply at the time when the proposed company is authorised.

Contents of notice under regulation 69O U.K.

69Q.— (1) This regulation applies if notice is given under regulation 69O.

(2) An existing company notice must specify the accounting period from the beginning of which this Part is to apply to the company (the “specified accounting period”).

(3) An existing company notice must be accompanied by—

(a) a statement by the manager of the open-ended investment company that the conditions specified in regulations 69E to 69N are reasonably expected to be met in respect of the company throughout the specified accounting period;

(b) the following documents relating to the company—

(i) its instrument of incorporation, and

(ii) its prospectus;

(c) a copy of the application to the Financial Services Authority for agreement to changes in the company’s instrument of incorporation and its prospectus; and

(d) copies of any documents accompanying the application mentioned in sub-paragraph (c) to the extent that those documents do not fall within sub-paragraphs (a) and (b).

(4) A future company notice must specify that this Part will apply to the proposed company from the date of its incorporation and authorisation.

(5) A future company notice must be accompanied by—

(a) a statement by the applicant that the conditions specified in regulations 69E to 69N are reasonably expected to be met in respect of the proposed company throughout its first accounting period;

(b) the following documents relating to the proposed company—

(i) its proposed instrument of incorporation, and

(ii) its proposed prospectus (including any supplements to the proposed prospectus);

(c) a copy of the application to the Financial Services Authority for approval of the proposed company as an open-ended investment company; and

(d) copies of any documents accompanying the application mentioned in sub-paragraph (c) to the extent that those documents do not fall within sub-paragraphs (a) and (b).

Procedural matters relating to the giving of notice for this Part to apply U.K.

Notice: further provisions: quashing notices U.K.

69R.— (1) This regulation applies if any of conditions A to C are met.

(2) Condition A is that an existing company notice is given, but the notice is not accompanied by the documents specified in regulation 69Q(3)(b).

(3) Condition B is that a future company notice is given, but the notice is not accompanied by the documents specified in regulation 69Q(5)(b).

(4) Condition C is that a person gives a notice under regulation 69O in circumstances where the documents supplied do not demonstrate that the open-ended investment company (or the proposed open-ended investment company) will meet all the conditions of membership of the Property AIF regime.

(5) HM Revenue and Customs may give a notice (a “quashing notice”) quashing the notice given under regulation 69O—

(a) to the manager of the open-ended investment company if an existing company notice has been given, or

(b) to the applicant if a future company notice has been given.

Procedure relating to quashing notices U.K.

69S.— (1) HM Revenue and Customs must not give a quashing notice until—

(a) they have given a notice (a “preliminary notice”) to the person giving the notice under regulation 69O specifying the reasons why the preliminary notice is given, and

(b) they have given the person giving the notice under regulation 69O a period of 28 days to rectify the matters specified in the preliminary notice.

Paragraph (1)(b) is subject to paragraphs (7) to (9).

(2) HM Revenue and Customs must give a preliminary notice within a period of 28 days beginning with the day on which they receive the notice given under regulation 69O.

(3) HM Revenue and Customs must—

(a) give a quashing notice, or

(b) give notice to the manager of the open-ended investment company or to the applicant (as the case may be) that they are satisfied that the matters specified in the preliminary notice have been rectified,

within a period of 28 days beginning on the day specified in paragraph (4).

(4) The day specified is whichever is the earlier to occur of—

(a) the day immediately following the expiry of the period specified in the preliminary notice, and

(b) the day on which HM Revenue and Customs receive notice from the manager of the open-ended investment company or from the applicant (as the case may be) that the manager or applicant thinks—

(i) that the matters specified in the preliminary notice have been rectified, or

(ii) that the original notice given under regulation 69O is valid.

(5) If HM Revenue and Customs give a preliminary notice, the open-ended investment company (or, as the case may be, the proposed open-ended investment company) in respect of which the notice is given may not enter the Property AIF regime until HM Revenue and Customs have notified the manager of the company (or, as the case may be, the applicant) that they are satisfied that the matters specified in the preliminary notice have been rectified.

(6) If HM Revenue and Customs give a quashing notice, and the person to whom the notice is given appeals, the open-ended investment company (or, as the case may be, the proposed open-ended investment company) in respect of which the notice is given may not enter the Property AIF regime until the appeal is determined.

(7) The period of 28 days mentioned in paragraph (1)(b) is replaced by the period referred to in paragraph (9) if, within that 28 day period, the conditions specified in paragraph (8) are met.

(8) The conditions are that—

(a) HM Revenue and Customs and the applicant are in agreement as to the changes needed to the notice or to the documents accompanying the notice (or to both),

(b) the applicant has given notice to HM Revenue and Customs stating that the changes referred to in sub-paragraph (a) will take a specified period (which is longer than 28 days) to effect, and

(c) HM Revenue and Customs have given notice to the applicant accepting the statement made in the notice given under sub-paragraph (b).

(9) The period is the specified period mentioned in paragraph (8)(b).

Appeal against quashing notice U.K.

69T.— (1) A person to whom a quashing notice is given may appeal to the Special Commissioners.

(2) The notice of appeal must be given to HM Revenue and Customs within a period of 28 days beginning with the day on which the quashing notice is given.

(3) On an appeal the Special Commissioners shall determine whether it was just and reasonable for HM Revenue and Customs to give the quashing notice.

(4) If the Special Commissioners allow the appeal—

(a) they may direct that this Part shall apply to the open-ended investment company (or, as the case may be to the proposed open-ended investment company), and

(b) they may specify the date from which this Part shall so apply.

(5) The date mentioned in paragraph (4)(b)—

(a) must not be earlier than the beginning of the specified accounting period if an existing company notice has been given, and

(b) must not be earlier than the date of incorporation and authorisation if a future company notice has been given.

Clearance applications U.K.

Clearance in relation to the genuine diversity of ownership condition U.K.

69U.— (1) An application for clearance that an open-ended investment company meets the genuine diversity of ownership condition may be made in writing to HM Revenue and Customs—

(a) by the manager of an open-ended investment company, or

(b) if it is proposed to incorporate an open-ended investment company, by the applicant.

(2) An application for clearance must be accompanied by the company’s instrument of incorporation and its prospectus in the form in which it is proposed that those documents will apply at the beginning of the first accounting period in which this Part will apply to the open-ended investment company.

(3) The officer of Revenue and Customs dealing with the application for clearance may require the manager of the company to provide further particulars if the officer thinks that full particulars of the company (or of the proposed company) have not been provided.

(4) HM Revenue and Customs must notify the person making the application within 28 days of the receipt of the particulars (or, if paragraph (3) applies, of all further particulars required) that they—

(a) give clearance that the company meets the genuine diversity of ownership condition;

(b) give that clearance subject to conditions; or

(c) refuse to give that clearance.

(5) The company may not rely on a clearance given under this regulation if—

(a) at the beginning of the first accounting period in which this Part applies to the company, a relevant statement in the company’s instrument of incorporation or its prospectus is not in accordance with a relevant statement in the documents considered by HM Revenue and Customs before giving clearance,

(b) the company acts in contravention of a relevant statement in its instrument of incorporation or prospectus in issue for the time being, or

(c) the company amends a relevant statement in its instrument of incorporation or prospectus in issue for the time being.

(6) But paragraph (5)(c) does not apply if the company has obtained a clearance given under this regulation which applies to the amendment.

Consequences of entry U.K.

Effects of entry U.K.

69V.— (1) Property rental business of F (pre-entry) shall be treated for the purposes of corporation tax as ceasing at entry.

(2) Assets which immediately before entry are involved in property rental business of F (pre-entry) shall be treated for the purposes of corporation tax as being sold by F (pre-entry) immediately before entry and reacquired by F (tax-exempt) immediately after entry.

(3) For the purposes of corporation tax, on entry one accounting period of the open-ended investment company shall end and another shall begin.

(4) On entry a new distribution period of the open-ended investment company shall begin.

(5) The sale and reacquisition deemed under paragraph (2) shall not have effect for the purposes of tax in respect of chargeable gains.

(6) For the purposes of CAA 2001, the sale and reacquisition deemed under paragraph (2)—

(a) shall not give rise to allowances or charges, and

(b) shall not make it possible to make an election under section 198 or 199 of that Act (apportionment).

(7) For the purposes of CAA 2001, anything done by or to F (pre-entry) before entry in relation to an asset which is deemed under paragraph (2) to be sold and reacquired shall be treated after entry as having been done by or to F (tax-exempt).

Duration U.K.

69W.   Once this Part has begun to apply to an open-ended investment company it shall continue to apply unless and until it ceases to apply in accordance with Chapter 7 of this Part.

CHAPTER 3 U.K. THE TAX TREATMENT OF PROPERTY AIFS

Categories of business U.K.

Ring-fencing of tax-exempt business U.K.

69X.— (1) For the purposes of corporation tax, the business of F (tax-exempt) shall be treated as a separate business (distinct from—

(a) any business carried on by F (pre-entry),

(b) any business carried on by F (residual), and

(c) any business carried on by F (post-cessation)).

(2) For the purposes of corporation tax, F (tax-exempt) shall be treated as a separate company (distinct from—

(a) F (pre-entry),

(b) F (residual), and

(c) F (post-cessation)).

(3) In particular—

(a) a loss incurred by F (tax-exempt) may not be set off against the net income of F (residual),

(b) a loss incurred in respect of F (residual) may not be set off against the net income of F (tax exempt),

(c) a loss incurred in respect of F (pre-entry) may not be set off against the net income of F (tax-exempt) (but this regulation does not prevent a loss of that kind from being set off against profits of F (residual)),

(d) a loss incurred by F (tax-exempt) may not be set off against profits arising to F (post-cessation) (in respect of business of any kind), and

(e) receipts accruing after entry but relating to business of F (pre-entry) shall not be treated as receipts of F (tax-exempt).

(4) In paragraph (3) a reference to a loss includes a reference to a deficit, expense, charge or allowance.

(5) Section 392B of ICTA (ring-fencing of losses from overseas property business) shall not apply to business of F (tax-exempt).

(6) Paragraphs 5B and 5C of Schedule 28AA to ICTA (transfer pricing: exemption for small and medium enterprises) shall not apply to an open-ended investment company to which this Part applies (whether to F (tax-exempt) or to F (residual)).

Chargeability to tax U.K.

Chargeability to corporation tax U.K.

69Y.— (1) The net income of F (tax-exempt) (see regulation 69Z1) shall not be charged to corporation tax.

(2) The net income of F (residual) (see regulation 69Z3) shall be charged to corporation tax at the rate applicable for open-ended investment companies (see section 468A(1) of ICTA).

Meaning of “net income” U.K.

69Z.— (1) In this Part the “net income” of an open-ended investment company for an accounting period means, in the case of an open-ended investment company that prepares accounts in accordance with UK generally accepted accounting practice, the amount falling to be dealt with under the heading “Net income/(expense) before taxation” in the company’s statement of total return for the accounting period.

(2) In paragraph (1) “the company’s statement of total return for the accounting period” is to be construed in accordance with regulation 12.

Calculation of net income of F (tax-exempt) U.K.

69Z1.— (1) This regulation applies to determine the net income of F (tax-exempt) for the purposes of this Part.

(2) Section 21A of ICTA (calculation of profits of Schedule A business) shall apply to income arising from the business of F (tax-exempt).

(3) Paragraph 2(3) of section 15(1) of ICTA (Schedule A: disregard of credits and debits from loan relationships and derivative contracts) shall not apply in respect of—

(a) a loan relationship if or in so far as it relates to tax-exempt business,

(b) a hedging derivative contract if or in so far as it relates to tax-exempt business, or

(c) embedded derivatives if or in so far as the host contract is entered into for the purposes of tax-exempt business.

(4) For the purposes of paragraph (3)—

(a) a derivative contract is hedging in relation to a company if or in so far as it is acquired as a hedge of risk in relation to an asset by the exploitation of which tax-exempt business is conducted,

(b) a derivative contract is hedging in relation to a company if or in so far as it is acquired as a hedge of risk in relation to a liability incurred in connection with tax-exempt business,

(c) a designation of a contract as wholly or partly hedging for the purposes of a company’s accounts shall be conclusive, and

(d) “embedded derivatives” and “host contract” shall be construed—

(i) in accordance with section 94A of FA 1996 in relation to loan contracts with embedded derivatives,

(ii) in accordance with paragraph 2A of Schedule 26 to FA 2002 in relation to non-financial contracts with embedded derivatives,

(iii) in accordance with paragraph 2B of Schedule 26 to FA 2002 in relation to hybrid derivatives.

(5) In paragraph (4)(a) the reference to an asset includes a reference to—

(a) the value of an asset, and

(b) profits attributable to it.

(6) Net income shall be computed without regard to items giving rise to credits or debits which would be within Schedule 26 to FA 2002 (derivative contracts) but for paragraph 4(2)(b) of that Schedule (exclusion of share-based and unit-trust-based contracts).

(7) Income and expenditure relating partly to tax-exempt business and partly to non-tax-exempt business shall be apportioned reasonably.

(8) Section 3(1) of CAA 2001 (claims for capital allowances) shall not apply; and any allowance which the company could claim under that section shall be made automatically and reflected in the calculation of net income.

Components of income arising to F (residual) U.K.

69Z2.— (1) For the purposes of this Part the income arising to F (residual) consists of—

(a) distributions qualifying for exemption under section 208 of ICTA, and

(b) income arising from the business of F (residual).

(2) Section 21A of ICTA (calculation of profits of Schedule A business) shall apply to income arising from the business of F (residual) if and to the extent that income arising from the business of F (residual) is chargeable to corporation tax under Schedule A.

Calculation of net income of F (residual) U.K.

69Z3.   Use this regulation to determine the net income of F (residual) for the purposes of this Part.

First rule

Determine the amount of the income arising to F (residual).

Second rule

Deduct any amounts whose deduction is required or allowed under the Corporation Tax Acts (including any distributions qualifying for exemption under section 208 of ICTA).

In this Part the amount so found is called the “pre-distribution amount”.

Third rule

Deduct the amount attributed to PAIF distributions (interest) under regulation 69Z14(b).

The result is the net income of F (residual).

Breaches of conditions U.K.

Breach of the genuine diversity of ownership condition U.K.

69Z4.— (1) This regulation applies if an open-ended investment company to which this Part applies is in breach of the genuine diversity of ownership condition.

(2) Within 28 days of becoming aware of the breach, the company must provide the following information to the Commissioners—

(a) the date on which the condition first ceased to be met;

(b) the date on which the company became aware of the breach;

(c) details of the condition that was breached;

(d) the nature of the breach;

(e) the steps the company proposes to take to rectify the breach; and

(f) the date by which the company proposes to rectify the breach.

(3) The date referred to in paragraph (2)(f) must be the earliest date by which the objective of complying with the genuine diversity of ownership condition may reasonably be achieved.

(4) The Commissioners may give a termination notice to the company if—

(a) the steps that the company proposes to take will not rectify the breach, or

(b) the date by which the company proposes to rectify the breach is not the earliest date by which the objective of remedying the genuine diversity ownership condition may reasonably be achieved.

(5) If there are three different breaches of the genuine diversity of ownership condition in three different accounting periods in a period of ten years beginning with the first day of the accounting period in which the company becomes aware of the first of those breaches, the Commissioners may give a termination notice to the company.

Breach of the corporate ownership condition U.K.

69Z5.— (1) This regulation applies if an open-ended investment company to which this Part applies is in breach of the corporate ownership condition.

(2) If there is a breach which is caused by the action of a shareholder in the company and the company has not taken reasonable steps to prevent the breach (so that, accordingly, there is a charge to corporation tax under regulation 69Z12) (a “specified breach”), this Part shall continue to apply to the company despite the breach (but see paragraph (3) and regulation 69Z8).

(3) If there are three specified breaches in a period of ten years beginning with the first day of the accounting period in which the first specified breach occurs, the Commissioners may give a termination notice to the company.

Breach of the loan creditor condition U.K.

69Z6.— (1) This regulation applies if an open-ended investment company to which this Part applies is in breach of the loan creditor condition.

(2) If the company is inadvertently in breach of the loan creditor condition but rectifies the breach within a period of 28 days beginning with the day on which the company first becomes aware of the breach, this Part shall continue to apply to the company despite the breach (but see paragraphs (5) and (6) and regulation 69Z8).

(3) If the company is inadvertently in breach of the loan creditor condition but does not rectify the breach within a period of 28 days beginning with the day on which the company first becomes aware of the breach, the Commissioners may give a termination notice to the company.

(4) If the company is intentionally or negligently in breach of the loan creditor condition, the Commissioners may give a termination notice to the company.

(5) If the company is in breach of the same condition specified in paragraphs (2) to (5) of regulation 69M in two different accounting periods in a period of ten years beginning with the first day of the accounting period in which the company becomes aware of the first of those breaches, the Commissioners may give a termination notice to the company.

(6) If the company is in breach of the conditions specified in paragraphs (2) to (5) of regulation 69M in three different accounting periods in a period of ten years beginning with the first day of the accounting period in which the company becomes aware of the first of those breaches, the Commissioners may give a termination notice to the company.

Breach of balance of business conditions U.K.

69Z7.— (1) Paragraph (2) applies if a newly qualified company—

(a) is in breach of condition A set out in regulation 69N(2)(a) in its first accounting period, or

(b) is in breach of condition B set out in regulation 69N(3)(a) at the end of its first accounting period.

(2) This Part shall cease to apply to the company at the end of its first accounting period and regulation 69Z41 shall apply.

(3) Paragraphs (4) to (7) apply if an open-ended-investment company to which this Part applies—

(a) is in breach of condition A set out in regulation 69N(2)(b) in an accounting period, or

(b) is in breach of condition B set out in regulation 69N(3)(b) at the end of an accounting period.

(4) If the conditions specified in paragraph (6) are met, this Part shall continue to apply to the company despite the breach (but see paragraph (7) and regulation 69Z8).

(5) If the conditions specified in paragraph (6) are not met, the Commissioners may give a termination notice to the company.

(6) The conditions are that—

(a) property investment business is at least 50% of the company’s net income in the accounting period,

(b) the value of the assets involved in property investment business is at least 50% of the total value of assets held by the company at the end of the accounting period.

(7) If this regulation applies to a company in three different accounting periods in a period of ten years beginning with the first day of the accounting period in which the company becomes aware of the first of those breaches, the Commissioners may give a termination notice to the company.

Multiple breaches of separate conditions U.K.

69Z8.— (1) This regulation applies in relation to an open-ended investment company to which this Part applies if—

(a) there has been a breach of at least two of the conditions in regulations 69E to 69N,

(b) at least one of the conditions breached is contained in a different regulation from that containing another of those breached, and

(c) there have been five breaches in a period of ten years beginning with the first day of the accounting period in which the first breach occurs.

(2) The Commissioners may give a termination notice to the company.

Further provisions U.K.

Profit/financing costs in the case of a Property AIF that is a qualified investor scheme U.K.

69Z9.— (1) This regulation applies if conditions A and B are met.

(2) Condition A is that an open-ended investment company to which this Part applies is a qualified investor scheme.

(3) Condition B is that the result of the following calculation is less than 1.25 in respect of an accounting period—

(4) In paragraph (3)—

“Income” means the amount of the net income of F (tax-exempt) arising in the accounting period (before the offset of capital allowances, of losses from a previous accounting period, and of amounts taken into account under regulation 69Z1(3)), and

“Financing Costs” means the amount of the financing costs incurred in that period in respect of the business of F (tax-exempt).

(5) An amount shall be charged to corporation tax.

(6) That amount is determined as follows—

• Step One

  Determine the financing costs which, given the actual income, would produce the result of 1.25 in the calculation specified in paragraph (3) (the “theoretical financing costs”).

• Step Two

  Determine the amount by which the actual financing costs exceed the theoretical financing costs (“the excess financing cost”).

• Step Three

  Divide the main rate at which corporation tax is charged for the accounting period by the rate at which corporation tax is charged on an open-ended investment company for the accounting period (see section 468A(1) of ICTA) to determine the multiplier.

• Step Four

  Multiply the excess financing cost by the multiplier.

The result is the amount charged to tax.

(7) For the purposes of paragraphs (3) and (4) “financing costs” are the costs of debt finance; and in calculating the costs of debt finance in respect of an accounting period the matters to be taken into account include—

(a) costs giving rise to debits in respect of debtor relationships of the company under Chapter 2 of Part 4 of FA 1996 (loan relationships), other than debits in respect of exchange losses from such relationships (within the meaning of section 103(1A) and (1B) of that Act),

(b) any exchange gain or loss from a debtor relationship within the meaning of that Chapter in relation to debt finance,

(c) any credit or debit falling to be brought into account under Schedule 26 to FA 2002 (derivative contracts) in relation to debt finance,

(d) the financing cost implicit in a payment under a finance lease, and

(e) any other costs arising from what would be considered, in accordance with generally accepted accounting practice, to be a financing transaction.

(8) No loss, deficit, expense or allowance may be set off against the amount charged to tax by paragraph (5).

Cancellation of tax advantage U.K.

69Z10.— (1) This regulation applies if a company to which this Part applies has tried to obtain a tax advantage for itself or another person.

(2) The Commissioners may give a notice to the company specifying the tax advantage.

(3) If the Commissioners give a notice to the company under paragraph (2) a tax advantage obtained by the company shall be counteracted, in accordance with the notice, by an adjustment by way of—

(a) an assessment;

(b) the cancellation of a right of repayment;

(c) a requirement to return a repayment already made; or

(d) the computation or recomputation of profits or gains, or liability to tax, on a basis specified by the Commissioners in the notice.

(4) The Commissioners may (in addition to the adjustment under paragraph (3)) assess the company to such additional amount of income tax under Case VI of Schedule D as they think is equivalent to the value of the tax advantage.

(5) For the purposes of this regulation “tax advantage” has the meaning given by section 709 of ICTA.

(6) But a company does not obtain a tax advantage by reason only of this Part applying to it, unless it does anything (whether before or during the application of this Part) which is wholly or principally designed to create or inflate or apply a loss, deduction or expense (whether or not suffered or incurred by the company).

Appeal against notice under regulation 69Z10 U.K.

69Z11.— (1) If a notice is given to a company under regulation 69Z10, the company may appeal to the Special Commissioners.

(2) The notice of appeal must be given to HM Revenue and Customs within a period of 28 days beginning with the day on which the notice under regulation 69Z10 is given.

(3) On an appeal the Special Commissioners may—

(a) affirm, vary or cancel the notice, and

(b) affirm, vary or quash an assessment made under regulation 69Z10(4).

Distribution to holder of excessive rights: charge to tax U.K.

69Z12.— (1) This regulation applies if an open-ended investment company to which this Part applies—

(a) makes a distribution to, or in respect of, a holder of excessive rights (see regulation 69Z13), and

(b) the company has not taken reasonable steps to prevent the possibility of such a distribution being made.

(2) The company is treated as having received an amount of income calculated in accordance with paragraph (3).

(3) The amount of the income is determined by the formula—

• I  x  P

(4) In paragraph (3)—

I is the net income of F (tax-exempt) distributable in accordance with regulation 69Z14(a);

P is the percentage of the rights to the net asset value of the company held by, or on behalf of, the holder of excessive rights.

(5) The amount determined in accordance with paragraph (3) shall be charged to corporation tax as if it were income of F (residual) chargeable under Case VI of Schedule D arising in the accounting period in which the distribution mentioned in paragraph (1) was made by the company.

(6) No loss, deficit, expense or allowance may be set off against the amount charged to tax by paragraph (5).

Meaning of “holder of excessive rights” U.K.

69Z13.— (1) In this Part a “holder of excessive rights” means a body corporate which—

(a) is a participant in an open-ended investment company to which this Part applies, and

(b) is beneficially entitled to shares representing rights to 10% or more of the net asset value of the company.

(2) Paragraphs (4) and (5) of regulation 69L apply for the purposes of paragraph (1) as they apply for the purposes of regulation 69K.

(3) In this Part an “excessive holding” means the holding of a holder of excessive rights.

CHAPTER 4 U.K. DISTRIBUTIONS MADE BY PROPERTY AIFS

Attribution of distributions U.K.

69Z14.   The total amount shown in the distribution accounts of an open-ended investment company to which this Part applies as available for distribution to participants shall be attributed—

(a) first, to property income distributions up to the amount of the net income of F (tax-exempt) (determined in accordance with regulation 69Z1),

(b) secondly, to PAIF distributions (interest) up to the pre-distribution amount (determined in accordance with regulation 69Z3), and

(c) finally, to PAIF distributions (dividends).

Property income distributions U.K.

69Z15.— (1) This regulation applies if—

(a) an open-ended investment company to which this Part applies makes a distribution, and

(b) the amount distributed includes sums attributed to property income distributions.

(2) The Tax Acts shall have effect as if the sums were payments made on the distribution date by the company to the participants in proportion to their rights.

(3) Regulation 69Z18 (property income distributions: liability to tax of participants) explains how a property income distribution received by a participant is treated.

(4) In these Regulations a “property income distribution” means a sum attributed to property income distributions which is distributed (including a payment made to a participant who is not chargeable to income tax or corporation tax).

PAIF distributions (interest) U.K.

69Z16.— (1) This regulation applies if—

(a) an open-ended investment company to which this Part applies makes a distribution, and

(b) the amount distributed includes sums attributed to PAIF distributions (interest).

(2) The Tax Acts shall have effect as if the sums were payments of yearly interest made on the distribution date by the company to the participants in proportion to their rights.

(3) In this Part a “PAIF distribution (interest)” means a sum attributed to PAIF distributions (interest) which is distributed (including a payment made to a participant who is not chargeable to income tax).

PAIF distributions (dividends) U.K.

69Z17.— (1) This regulation applies if—

(a) an open-ended investment company to which this Part applies makes a distribution, and

(b) the amount distributed includes sums attributed to PAIF distributions (dividends).

(2) The Tax Acts shall have effect as if the sums were dividends on shares paid on the distribution date by the company to the participants in proportion to their rights.

(3) In this Part a “PAIF distribution (dividends)” means a sum attributed to PAIF distributions (dividends) which is distributed (including a dividend treated as paid to a participant who is not chargeable to corporation tax).

CHAPTER 5 U.K. THE TREATMENT OF PARTICIPANTS IN PROPERTY AIFS

Treatment of distributions: liability to tax of participants U.K.

Property income distributions: liability to tax of participants U.K.

69Z18.— (1) A property income distribution received by a participant in an open-ended investment company to which this Part applies shall be treated—

(a) in the case of a participant within the charge to corporation tax, as profits of a Schedule A business, and

(b) in the case of a participant within the charge to income tax, as the profits of a UK property business (within the meaning of section 264 of ITTOIA 2005).

(2) A distribution received by a participant who is not resident in the United Kingdom—

(a) if the participant is a company within the charge to corporation tax, shall be chargeable to tax as profits of a Schedule A business,

(b) if the participant is a person other than a company within the charge to corporation tax, shall be chargeable to tax as profits of a UK property business (within the meaning of section 264 of ITTOIA 2005), and

(c) in either case shall not be chargeable to tax by virtue of sections 971 and 972 of ITA 2007 (non-resident landlords).

(3) Paragraph (1) shall not apply in relation to a participant if and in so far as the participant—

(a) is a dealer in respect of distributions (within the meaning of section 95 of ICTA),

(b) is a dealer in securities who is charged to tax under Part 2 of ITTOIA 2005 (trading income) in respect of distributions made by companies,

(c) is an individual member of Lloyd’s (within the meaning given by section 184(1) of FA 1993) and the distribution is made in respect of assets forming part of—

(i) a premium trust fund of his (within the meaning given by section 174 of FA 1993), or

(ii) an ancillary trust fund of his (within the meaning given by section 176 of FA 1993), or

(d) is a corporate member of Lloyd’s (within the meaning given by section 230(1) of FA 1994) and the distribution is made in respect of assets forming part of—

(i) a premium trust fund of his (within the meaning given by section 222 of FA 1994), or

(ii) an ancillary trust fund of his (within the meaning given by section 223 of FA 1994).

(4) Section 114(1)(a) of ICTA (partnerships with companies as members) does not disapply paragraph (1).

(5) Sections 231 of ICTA and 397 of ITTOIA 2005 (tax credits in respect of qualifying distributions) shall not apply to property income distributions.

(6) Property income distributions received by one participant acting in one capacity shall be treated, for the purposes of paragraph (1), as the profits of a single business which is separate from—

(a) any other Schedule A business carried on by the participant,

(b) any other UK property business (within the meaning of section 264 of ITTOIA 2005) carried on by the participant,

(c) any overseas property business (within the meaning of section 70A(4) of ICTA) carried on by the participant, and

(d) any overseas property business (within the meaning of section 265 of ITTOIA 2005) carried on by the participant.

(7) In the case of a participant which is a partnership, paragraph (6) applies to receipts by a partner of a share of any distribution as it applies to receipts by a participant.

PAIF distributions (interest): liability to tax of participants U.K.

69Z19.— (1) A PAIF distribution (interest) received by a participant in an open-ended investment company to which this Part applies shall be treated as if it were a payment of yearly interest.

(2) Sections 231 of ICTA and 397 of ITTOIA 2005 (tax credits in respect of qualifying distributions) shall not apply to PAIF distributions (interest).

Property distributions (dividends): liability to tax of participants U.K.

69Z20.— (1) A PAIF distribution (dividends) received by a participant in an open-ended investment company to which this Part applies shall be treated as if it were a dividend on shares.

(2) If a PAIF distribution (dividends) is made for a distribution period to a participant chargeable to corporation tax, regulations 48 to 52A shall not apply to the distribution.

Distributions made after cessation U.K.

69Z21.— (1) This regulation applies if an open-ended investment company—

(a) is a company to which this Part applies in respect of an accounting period,

(b) makes a distribution in respect of that accounting period, and

(c) the distribution is made after cessation.

(2) Regulations 69Z18 to 69Z20 apply in relation to the distribution.

Deduction of tax from distributions U.K.

Deduction of tax from property income distributions U.K.

69Z22.— (1) On making a property income distribution, an open-ended investment company to which this Part applies must deduct a sum representing income tax at the basic rate in force for the tax year in which the distribution date falls.

(2) A property income distribution shall be treated as having been received by the participant after deduction of income tax at the basic rate for the year of assessment in which the distribution date falls, from a corresponding gross amount.

(3) The sum is accordingly taken into account under sections 59B and 59D of TMA 1970 (see also paragraph 8 of Schedule 18 to the Finance Act 1998) in determining the income tax or corporation tax payable by, or repayable to, the participant.

(4) This regulation is subject to regulation 69Z24 (distribution payments to be made without deduction of tax).

Deduction of tax from PAIF distributions (interest) U.K.

69Z23.— (1) On making a PAIF distribution (interest), an open-ended investment company to which this Part applies must deduct a sum representing income tax at the savings rate in force for the tax year in which the PAIF distribution (interest) is made.

(2) Accordingly, the sum is one to which section 874 of ITA 2007 applies.

(3) In paragraph (1) the “savings rate” means the rate of income tax specified in section 7 of ITA 2007.

(4) This regulation is subject to regulation 69Z24 (distribution payments to be made without deduction of tax).

Distribution payments to be made without deduction of tax U.K.

69Z24.— (1) On making a distribution, an open-ended investment company to which this Part applies must not deduct any sum representing income tax if the company reasonably believes that conditions A and B are met.

(2) Condition A is that if the distribution were made by a UK-REIT out of the profits of C (tax-exempt), the distribution would be required to be made without any deduction representing income tax.

(3) Condition B is that if the distribution were a distribution of yearly interest, the distribution would be required to be made without any deduction representing income tax.

(4) If at the time it makes a distribution the company reasonably believes that conditions A and B are met, but in fact those conditions are not both met, these Regulations shall apply to the distribution as if it were never one which could be made without deduction of tax.

(5) In paragraph (2) “profits of C (tax-exempt)” shall be construed in accordance with Part 4 of FA 2006.

CHAPTER 6 U.K. COMPLIANCE IN RELATION TO THE PROPERTY AIF REGIME

Company tax return U.K.

Documents to be included with company tax return U.K.

69Z25.— (1) An open-ended investment company to which this Part applies must include documents A and B in its company tax return.

(2) Document A is a calculation of the net income of F(tax-exempt) and F(residual) in accordance with regulations 69Z1 to 69Z3.

(3) Document B is a reconciliation between—

(a) the net income of the company (see regulation 69Z), and

(b) the total income shown in the distribution accounts as attributed in accordance with regulation 69Z14.

(4) In paragraph (1) “company tax return” means the return required to be delivered pursuant to a notice under paragraph 3 of Schedule 18 to the Finance Act 1998, as read with paragraph 4 of that Schedule.

(5) Section 98 of TMA 1970 applies to any failure to furnish any information, give any certificate or produce any document or record in accordance with any provision of this Chapter as it applies to any such failure in the case of any provision specified in the second column of the Table below that section.

Breaches of conditions in Chapter 2 U.K.

Information to be provided by company to which this Part applies U.K.

69Z26.— (1) This regulation applies if an open-ended investment company to which this Part applies—

(a) does not meet a condition set out in Chapter 2 of this Part (entry into and membership of the Property AIF regime), and

(b) becomes aware that it does not meet the condition.

(2) As soon as reasonably practicable, the company must provide the following information to the Commissioners—

(a) the date on which the condition first ceased to be met and the date (if any) on which the condition was satisfied again;

(b) details of the condition that was breached;

(c) the nature of the breach; and

(d) what (if anything) the company has done to prevent the breach recurring.

(3) This regulation does not apply if the breach of condition is one to which regulation 69Z27 applies.

Holders of excessive rights U.K.

Information relating to holders of excessive rights U.K.

69Z27.— (1) This regulation applies if an open-ended investment company to which this Part applies becomes aware that it has made a distribution to, or in respect of, a holder of excessive rights.

(2) As soon as reasonably practicable, the company must provide the following information to the Commissioners—

(a) the name of every person to whom, or in respect of whom, the distribution specified in paragraph (1) was made;

(b) the address of every such person;

(c) the amount or value of the distribution;

(d) particulars of those persons’ interests in the company, including details of the percentage of rights to the net asset value of the company represented by the shares held by those persons;

(e) the steps the company took to prevent the acquisition of any excessive holding; and

(f) the steps the company has taken, or is taking, to ensure that there is no longer any excessive holding in the company.

Information about possible breaches of conditions of membership of Property AIF regime U.K.

Information to be provided to officers of Revenue and Customs U.K.

69Z28.— (1) This regulation applies if an officer of Revenue and Customs thinks that an open-ended investment company to which this Part applies—

(a) does not meet, or may not meet, a condition specified in Chapter 2 of this Part, or

(b) has not rectified a breach of such a condition.

(2) The officer may serve a notice on the manager of the company.

(3) The notice may require the manager to provide any of the information specified in regulation 69Z26(2) or, as the case may be, regulation 69Z27(2).

(4) The manager must comply with the notice within a period of 28 days beginning with the day on which the notice is served.

Accounting for tax deducted from property income distributions U.K.

Payments in an accounting period U.K.

69Z29.— (1) This regulation applies if—

(a) an open-ended investment company to which this Part applies makes a distribution in an accounting period of the company, and

(b) the distribution includes sums attributed to property income distributions or to PAIF distributions (interest) (or to both) (referred to in this Chapter as a “relevant distribution”).

(2) The company must deliver a return to an officer of Revenue and Customs for each return period—

(a) which falls within the accounting period, and

(b) in which the company makes a relevant distribution.

(3) The return periods are—

(a) the quarters ending on 31st March, 30th June, 30th September and 31st December (the “quarter days”); and

(b) any shorter period which—

(i) starts on the first day of an accounting period and ends with the first or only quarter day in that accounting period;

(ii) begins immediately after the last or only quarter day in that accounting period and ends on the last day of that accounting period; or

(iii) is an accounting period which starts and ends within a quarter.

(4) The company must deliver the return during a period of 14 days beginning with the day immediately following the end of the return period.

(5) The return must show the amount of—

(a) any relevant distributions made by the company in the return period, and

(b) the tax (if any) payable by the company in respect of those payments.

(6) The company must deliver, with the return for the return period which ends on the last day of an accounting period, a reconciliation statement showing, in relation to any distribution made during the accounting period, the amounts (if any) which are attributable to each of paragraphs (a) to (c) of regulation 69Z14 (attribution of distributions).

Collection and payment of tax U.K.

69Z30.— (1) Tax in respect of a relevant distribution is due at the time by which the return on which the distribution must be included is required to be delivered.

(2) The tax due is equal to the sum which the company is required to deduct from the relevant distribution under—

(a) regulation 69Z22(1) (deduction of tax from property income distributions), and

(b) regulation 69Z23(1) (deduction of tax from PAIF distributions (interest)).

(3) The tax is due from the company making the relevant distribution.

(4) The tax is payable without an officer of Revenue and Customs making any assessment.

Assessments where relevant distribution included in return U.K.

69Z31.— (1) This regulation applies if any tax in respect of a relevant distribution which is included in a return under this Chapter has not been paid at or before the time mentioned in regulation 69Z30.

(2) An officer of Revenue and Customs may make an assessment on the person who made the relevant distribution.

(3) Tax may be assessed under this regulation whether or not it has been paid when the assessment is made.

Assessments in other cases U.K.

69Z32.— (1) This regulation applies if an officer of Revenue and Customs thinks—

(a) that there is a relevant distribution which should have been included in a return under this Chapter and which has not been so included, or

(b) that a return under this Chapter is otherwise incorrect.

(2) An officer of Revenue and Customs may make an assessment on the person who made the relevant distribution to the best of the officer’s judgement.

Application of Income Tax Acts provisions about time limits for assessments U.K.

69Z33.— (1) The provisions of the Income Tax Acts about the time within which an assessment may be made apply to assessments under this Chapter, so far as those provisions refer or relate to—

(a) the tax year for which an assessment is made, or

(b) the year to which an assessment relates.

(2) Paragraph (1) applies despite the fact that an assessment under this Chapter may relate to a return period which is not a tax year.

(3) The provisions of section 36 of TMA 1970 (fraudulent or negligent conduct) about the circumstances in which an assessment may be made out of time apply accordingly on the basis that any such assessment relates to the tax year in which the return period ends.

(4) Section 87 of TMA 1970 (interest on overdue income tax deducted at source) applies for the purposes of a payment due under regulation 69Z30 or an assessment made under regulation 69Z31 or 69Z32.

Certificates of deduction of tax U.K.

69Z34.— (1) A company making a relevant distribution which is subject to deduction of tax by virtue of regulation 69Z22(1) must furnish the recipient with a statement in writing showing—

(a) the gross amount of the payment,

(b) the amount of tax deducted, and

(c) the actual amount paid.

(2) The duty imposed by subsection (1) is enforceable at the suit or instance of the recipient.

Company’s duty to deliver amended return U.K.

69Z35.— (1) This regulation applies if an open-ended investment company to which this Part applies makes a distribution, and then becomes aware that—

(a) anything which should have been included in a return delivered by the company under these Regulations has not been so included,

(b) anything which should not have been included in a return delivered by the company under these Regulations has been so included, or

(c) any other error has occurred in a return delivered by the company under these Regulations.

(2) The company must deliver an amended return correcting the error to an officer of Revenue and Customs without delay.

(3) If the company delivers an amended return such assessments, adjustments, setoffs or payments or repayments of tax as are necessary for achieving the objective mentioned in paragraph (4) must be made.

(4) The objective is that the resulting liabilities to income and corporation tax (including interest on unpaid or overpaid tax) of the company or any other person are the same as they would have been if a correct return had been delivered.

CHAPTER 7 U.K. LEAVING THE PROPERTY AIF REGIME

Termination by notice: company U.K.

69Z36.— (1) This regulation applies if an open-ended investment company to which this Part applies gives a notice under this regulation specifying a date at the end of which this Part is to cease to apply to the company.

(2) This Part shall cease to apply to the company at the end of that date.

(3) A notice under paragraph (1) must be given in writing to the Commissioners.

(4) The date specified under paragraph (1) must be after the date on which the Commissioners receive the notice.

Termination by notice: Commissioners U.K.

69Z37.— (1) This regulation applies if the Commissioners give a notice in writing under this paragraph to an open-ended investment company to which this Part applies (a “termination notice”).

(2) This Part shall cease to apply to the company.

(3) The Commissioners may give a termination notice only if—

(a) a provision contained in this Part provides that the Commissioners may give a termination notice,

(b) there is an intentional or negligent breach of a condition in Chapter 2, or

(c) there is an attempt to gain a tax advantage to which regulation 69Z10 applies.

(4) A termination notice must state the reason for it.

(5) If a termination notice is given to an open-ended investment company, this Part shall be taken to have ceased to apply to the open-ended investment company at the end of the accounting period before the accounting period during which the event occurs (or the last event occurs) which caused the Commissioners to give the notice.

Appeal against termination notice U.K.

69Z38.— (1) An open-ended investment company to which a termination notice is given may appeal to the Special Commissioners.

(2) The notice of appeal must be given to HM Revenue and Customs within a period of 28 days beginning with the day on which the termination notice is given.

(3) On an appeal the Special Commissioners shall determine whether it was just and reasonable for HM Revenue and Customs to give the termination notice.

(4) If they decide that it was, they must confirm the notice.

(5) If they decide that it was not, they must set aside the notice.

Company ceasing to be authorised etc. U.K.

69Z39.— (1) This regulation applies if an open-ended investment company to which this Part applies—

(a) ceases to be authorised by the Financial Services Authority,

(b) ceases to be an open-ended investment company, or

(c) ceases to carry on property investment business.

(2) This Part shall cease to apply to the company at the end of the date on which the company ceases to be authorised by the Financial Services Authority, to be an open-ended investment company, or to carry on property investment business (as the case may be).

Mergers U.K.

69Z40.— (1) This regulation applies if an open-ended investment company to which this Part applies—

(a) is party to a merger or takeover, and

(b) as a result, ceases to meet one or more of the conditions for this Part to apply.

(2) On the occurrence of the merger or takeover—

(a) an accounting period of the company shall end at the end of the date of the merger or takeover, and

(b) this Part shall cease to apply to the company at the end of that date.

Effects of cessation U.K.

69Z41.— (1) The business of F (tax-exempt) shall be treated for the purposes of corporation tax as ceasing immediately before cessation.

(2) Assets which immediately before cessation are involved in the business of F (tax-exempt) shall be treated for the purposes of corporation tax as being sold by F (tax-exempt) immediately before cessation and reacquired immediately after cessation by F (post-cessation).

(3) For the purposes of corporation tax, on cessation one accounting period of F (residual) shall end and an accounting period of F (post-cessation) shall begin.

(4) The sale and reacquisition deemed under paragraph (2) shall not have effect for the purposes of tax in respect of chargeable gains.

(5) For the purposes of CAA 2001, the sale and re-acquisition deemed under paragraph (2)—

(a) shall not give rise to allowances or charges, and

(b) shall not make it possible to make an election under section 198 or 199 of that Act (apportionment).

(6) For the purposes of CAA 2001, anything done by or to F (tax-exempt) before cessation in relation to an asset which is deemed under paragraph (2) to be sold and re-acquired shall be treated after cessation as having been done by or to F (post-cessation).]

PART 5 U.K. COMPLIANCE

Information relating to distributions U.K.

Application of section 234A of ICTA U.K.

70.—(1) Section 234A of ICTA M30 (information relating to distributions) applies in relation to an authorised investment fund with any necessary modifications.

(2) In the appropriate statement sent under that section to a participant within the charge to corporation tax, the legal owner of the authorised investment fund must include a statement showing the legal owner's net liability to corporation tax in respect of the gross income.

(3) In paragraph (2)—

“gross income” has the same meaning as in regulation 50, and

“net liability to corporation tax” is to be construed in accordance with regulation 49(3).

Marginal Citations

M30 Section 234A was inserted by section 32(1) of the Finance (No. 2) Act 1992 (c. 48) and amended by paragraph 2(2) of Schedule 37 to the Finance Act 1996 (c. 8).

Interest distributions U.K.

Notification of interest distributions made without deduction of tax U.K.

71.—(1) If, during a tax year, an authorised investment fund has made interest distributions without deduction of tax, the legal owner must give notice of that fact to the Commissioners within 14 days of the end of that tax year.

(2) Notice given under paragraph (1)—

(a) must be in writing, and

(b) has effect for the tax year in which it is given and for subsequent tax years until the notice is withdrawn.

(3) An authorised investment fund that fails to comply with paragraph (1) is liable to a penalty not exceeding £3,000 determined in accordance with section 100 of TMA 1970 M31 .

(4) Sections 100A, 100B, 102, 103(4) and 118(2) of TMA 1970 M32 apply to a penalty determined in accordance with paragraph (3).

Marginal Citations

M31 1970 c. 9. Section 100 was substituted by section 167 of the Finance Act 1989 (c. 26). There are amendments to section 100 but none is relevant.

M32 Sections 100A and 100B were substituted by section 167 of the Finance Act 1989, and section 100B was amended by paragraph 31 of Schedule 19 to the Finance Act 1994 and section 115(7) of the Finance Act 1995 (c. 4) and by S.I. 1994/1813. Section 102 was amended by section 168(40 of the Finance Act 1989. Section 118(2) was amended by Part VII of Schedule 8 to the Finance Act 1970 (c. 24) and by section 94 of the Finance (No. 2) Act 1987 (c. 51).

Information about interest distributions made without deduction of tax U.K.

72.—(1) The Commissioners may by notice require a person specified in paragraph (2) to provide them with such information as they may reasonably require for the purpose of determining whether interest distributions were properly made by that person without deduction of tax.

(2) The persons specified are—

(a) an open-ended investment company;

(b) the authorised corporate director of an open-ended investment company;

(c) a trustee of an authorised unit trust.

(3) The information to be provided may include copies of any relevant books, documents or other records.

(4) The information must be provided within such time (not being less than 14 days) as may be specified in the notice.

Inspection of records U.K.

73.—(1) A person specified in regulation 72(2) must, whenever required to do so, make available for inspection by an officer of the Commissioners authorised for that purpose, at such time as that officer may reasonably require, all such copies of books, documents or other records in their possession or under their control as may be required by the Commissioners under regulation 72.

(2) Every qualifying certificate supplied to a legal owner under Chapter 2 of Part 4 (participants chargeable to income tax) must be preserved by the legal owner in such manner as may be approved by the Commissioners for two years after it has ceased to be otherwise required under the provisions of these Regulations.

Use of information U.K.

74.—(1) Information obtained by the Commissioners under regulation 72 or 73—

(a) must not be used for the purpose of ascertaining the tax liability (if any) of any person other than the persons specified in paragraph (2), and

(b) must otherwise be used only for the purposes of these Regulations.

(2) The persons specified in this paragraph are—

(a) the open-ended investment company in question;

(b) the trustees of the authorised unit trust in question;

(c) a participant who is beneficially entitled to an interest distribution made without deduction of tax to whom the information obtained relates;

(d) where the whole of an interest distribution made to or received under a trust without deduction of tax 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, that person in so far as the information obtained relates to him; and

(e) where an interest distribution is made to or received under a trust without deduction of tax and sub-paragraph (d) does not apply, the trustees of that trust and any beneficiary of the trust to whom the information obtained relates.

(3) In paragraph (2)(e) “any beneficiary of the trust” means—

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

(b) any 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 the trustees of the trust.

(4) Paragraph (1) does not prevent any disclosure of information authorised under section 182(5) of the Finance Act 1989 M33 .

Marginal Citations

M33 1989 c. 26. Section 182(5) was amended by section 18(5) of the Child Trust Funds Act 2004 (c. 6).

Residence declarations U.K.

Inspection of residence declarations U.K.

75.—(1) The legal owner of an authorised investment fund must, on being required to do so by a notice given by an officer of the Commissioners, make available for inspection by such an officer—

(a) any residence declarations made to the authorised investment fund under Chapter 2 of Part 4 (participants chargeable to income tax), or

(b) any specified declaration or description of declarations.

(2) If a notice has been given to the legal owner under paragraph (1), the declarations shall be made available within such time as may be specified in the notice and the person carrying out the inspection may take copies of or extracts from them.

PART 6 U.K. FURTHER PROVISIONS RELATING TO AUTHORISED INVESTMENT FUNDS

CHAPTER 1 U.K. GENERAL

Ownership of shares of different denominations in open-ended investment companies U.K.

76.—(1) This regulation applies if conditions A and B are met.

(2) Condition A is that in respect of a given class of shares specified in the instrument of incorporation of an open-ended investment company, shares issued of that class consist of both smaller denomination shares and larger denomination shares.

(3) Condition B is that a participant owns both smaller denomination shares and larger denomination shares of that class.

(4) For the purposes of the provisions relating to ownership of shares in a company contained in the Tax Acts and TCGA 1992, the shares owned by the participant are treated as securities of the same class.

(5) Each larger denomination share is to be treated for those purposes as if it were comprised of the relevant number of smaller denomination shares.

(6) The market value of each smaller denomination share is to be taken for those purposes to be the relevant proportion of the market value of each larger denomination share.

(7) In this regulation—

“smaller denomination shares” means shares to which are attached rights specified in the company's instrument of incorporation that are expressed in the smaller of two denominations;

“larger denomination shares” means shares to which are attached rights so specified that are expressed in the larger of two denominations;

“relevant number” means the number calculated by reference to the relevant proportion; and

“relevant proportion” means the proportion, determined by the company's instrument of incorporation, which the rights attaching to each smaller denomination share bear to the rights attaching to each larger denomination share.

Non-discrimination in respect of different classes of shares U.K.

77.—(1) This regulation applies if the distribution accounts show an amount as available for distribution to participants.

(2) There must not be any discrimination between participants in respect of different classes of shares.

(3) There is no such discrimination if condition A and either condition B or C is met.

(4) Condition A is that the differences are wholly attributable to differences between the amounts or treatment for accounting purposes of the charges or expenses which—

(a) are permitted by the instrument of incorporation of the open-ended investment company concerned or the prospectus in issue for the time being of that company (including any supplements to that prospectus) or by the trust deed under which the authorised unit trust is constituted, and

(b) are payable out of the scheme property of that authorised investment fund in respect of the shares of those classes.

(5) Condition B is that the authorised investment fund is able to show that the differences between the amounts or treatment for accounting purposes of the charges or expenses referred to in condition A apply for bona fide commercial reasons.

(6) Condition C is that the differences are not such as to enable the participants in any one of those classes to obtain a tax advantage which they would not obtain if there were no differences between the amounts or treatment for accounting purposes of those charges or expenses.

(7) In paragraph (6) “tax advantage” has the same meaning as in Chapter 1 of Part 17 of ICTA (cancellation of tax advantages from transactions in securities).

CHAPTER 2 U.K. AMALGAMATION OF AN AUTHORISED UNIT TRUST WITH, AND CONVERSION OF AN AUTHORISED UNIT TRUST TO, AN OPEN-ENDED INVESTMENT COMPANY

Circumstances in which this Chapter applies U.K.

78.—(1) This Chapter applies if, in connection with a scheme of reorganisation, conditions A to E are met.

(2) Condition A is that the whole of the scheme property of an authorised unit trust that is available for transfer is transferred on a given date under an arrangement to an open-ended investment company.

(3) Condition B is that the consideration under the arrangement consists of or includes the issue, on the transfer date, of shares in the acquiring company to the holders of units in the target trust in exchange for those units.

(4) Condition C is that the consideration shares are issued to the holders of units in proportion to their holdings of the exchanged units.

(5) Condition D is that the consideration under the arrangement does not include anything else in addition to the issue of the consideration shares, other than (where applicable) the assumption or discharge by the acquiring company of liabilities of the trustees of the target trust.

(6) Condition E is that under the arrangement all the units in the target trust are extinguished.

(7) In this Chapter—

the “target trust” means the authorised unit trust mentioned in paragraph (2);

the “transfer date” means the given date mentioned in paragraph (2);

the “acquiring company” means the open-ended investment company mentioned in paragraph (2); and

“the whole of the scheme property of an authorised unit trust that is available for transfer” means the whole of the property subject to the trusts of the target trust, other than any property which is retained for the purpose of discharging liabilities of the trustees of the target trust;

the “consideration shares” means the shares in the acquiring company mentioned in paragraph (4); and

the “exchanged units” means the units in the target trust mentioned in paragraph (4).

Ending of accounting period of the target trust U.K.

79.—(1) An accounting period of the target trust (the “pre-transfer accounting period”) ends immediately before the transfer date; and, for the purposes of the Corporation Tax Acts, the whole of the scheme property of the target trust that is available for transfer is treated as having been transferred immediately after the end of that accounting period.

(2) This regulation applies despite anything in section 12(1) to (7) of ICTA (periods of assessment for corporation tax).

Carrying forward of excess management expenses U.K.

80.—(1) This regulation applies if condition A or B is met.

(2) Condition A is that, in respect of the pre-transfer accounting period of the target trust, the trustees are entitled, under section 75(9) of ICTA M34 (carry forward of management expenses and sums treated as management expenses), to carry forward an excess amount to the next accounting period of the trust.

(3) Condition B is that—

(a) the pre-transfer accounting period is the final accounting period of the target trust, and

(b) the trustees are entitled, under section 75(9) of ICTA, to carry forward an excess amount to what would have been the next accounting period of the trust were the trust to have an accounting period beginning on the transfer date.

(4) With effect from the transfer date, the entitlement is translated into a right in the acquiring company to treat the amount as if it had been carried forward under section 75(9) of ICTA to the first of its accounting periods to end on or after the transfer date.

Marginal Citations

M34 Section 75 was substituted by section 38(1) of the Finance Act 2004 (c. 12).

Distributions by authorised unit trust after the end of its pre-transfer accounting period U.K.

81.—(1) This regulation applies if, in respect of any post-transfer distribution date of the target trust, there is an amount which falls to be treated, in accordance with regulation [F13 22] (dividend distributions: general), as dividends on shares paid on that distribution date by the target trust to its participants in proportion to their rights.

(2) The amount shall instead be treated as dividends on shares paid on that date by the acquiring company to those persons in proportion to their rights.

(3) In this regulation “post-transfer distribution date” of a target trust means a distribution date of that trust which—

(a) occurs on or after the transfer date, and

(b) is the distribution date for a distribution period of the trust ending before the transfer date.

Textual Amendments

F13 Word in reg. 81(1) substituted (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 4

Continuing validity of residence declarations U.K.

82.—(1) This regulation applies if—

(a) before the transfer date, a unit holder has made a residence declaration to the trustees of the target trust, and

(b) immediately before the transfer date, the trustees of the target trust treated the residence declaration as valid.

(2) The acquiring company may treat the residence declaration as valid.

Powers of the acquiring company U.K.

83.—(1) On and after the transfer date, the acquiring company has the powers set out in paragraphs (2) and (3).

(2) The acquiring company may continue anything which—

(a) immediately before the transfer date was in the process of being done by the trustees of the target trust for the purposes of tax in relation to accounting periods of the target trust ending before that date, and

(b) is not continued by those trustees on or after the transfer date.

(3) The acquiring company may do anything which—

(a) immediately before the transfer date was not in the process of being done by the trustees of the target trust for the purposes of tax in relation to accounting periods of the target trust ending before that date and is not done by them for those purposes, and

(b) might reasonably have been expected to be done by those trustees for those purposes had the scheme of reorganisation not taken place.

Assessments made on discovery U.K.

84.  The provisions of this Chapter do not affect any enactment in the Tax Acts which provides for assessments to be made where an officer of the Commissioners discovers that a set-off, matching, repayment of tax, or payment of tax credit or provision for relief in any other form ought not to have been made, given or otherwise allowed, or is or has become excessive.

Prevention of double relief U.K.

85.  For the purposes of the Tax Acts, nothing in this Chapter has the effect of enabling—

(a) any set-off or matching of an amount to be made,

(b) any repayment of an amount of tax or payment of an amount of tax credit to be made, or

(c) any other relief to be given,

more than once in respect of the same amount or relief.

PART 7 U.K. CONSEQUENTIAL AMENDMENTS AND MODIFICATIONS OF ENACTMENTS

CHAPTER 1 U.K. AMENDMENTS OF REFERENCES TO REPEALED ENACTMENTS

Introduction U.K.

86.  Regulations 87 to 92—

(a) amend references in enactments to provisions repealed by section 17(1) of the Finance (No. 2) Act 2005, and

(b) make incidental, consequential and supplemental provision.

Amendments of TMA 1970 U.K.

87.—(1) TMA 1970 M35 is amended as follows.

(2) In section 98 (penalties in relation to special returns)—

(a) in subsection (4E) M36 for “Chapter 3 of Part 12 of the principal Act” substitute “ regulations made under section 17(3) of the Finance (No. 2) Act 2005 (as at 1st April 2006, see the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/[abcd])) ”.

(b) in the first column of the Table—

(i) omit the entry relating to section 468P(6) of ICTA,

(ii) omit the entry relating to regulations under section 468PB(3) of ICTA M37 , and

(iii) at the end insert—

“regulations under section 17(3) of the Finance (No. 2) Act 2005”.

Marginal Citations

M35 1970 c. 9.

M36 Section 98(4E) was inserted by section 203(12) of the Finance Act 2003 (c. 14).

M37 The entries relating to section 468P(6) and to regulations under section 468PB(3) were inserted by section 203(13) of the Finance Act 2003.

Amendment of ICTA U.K.

88.—(1) ICTA is amended as follows.

(2) In section 468(1) M38 (authorised unit trusts) for “section 468L” substitute “ regulations made under section 17(3) of the Finance (No. 2) Act 2005 (as at 1st April 2006, see regulation 18(3) of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/[abcd])) ”.

Marginal Citations

M38 Section 468(1) was amended by paragraph 3(2) of Schedule 14 to the Finance Act 1994 (c. 9).

Amendment of TCGA 1992 U.K.

89.—(1) TCGA 1992 is amended as follows.

(2) In section 99B(3) M39 (calculation of the disposal cost of accumulation units) for “section 468H of ICTA” substitute “ regulations made under section 17(3) of the Finance (No. 2) Act 2005 (as at 1st April 2006, see regulation 15 of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/[abcd])) ”.

Marginal Citations

M39 Section 99B was inserted by section 21 of the Finance (No. 2) Act 2005 (c. 22).

Amendment of FA 1996 U.K.

90.—(1) FA 1996 M40 is amended as follows.

(2) In paragraph 4(4) of Schedule 10 M41 (loan relationships: company holdings in unit trusts and offshore funds) for “section 468L(3) of the Taxes Act 1988” substitute “ regulations made under section 17(3) of the Finance (No. 2) Act 2005 (as at 1st April 2006, see regulation 18(3) of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/[abcd])) ”.

Marginal Citations

M40 1996 c. 8.

M41 Paragraph 4(4) of Schedule 10 was amended by paragraph 41(3) of Schedule 10 to the Finance Act 2004 (c. 12).

Amendments of ITTOIA 2005 U.K.

91.—(1) ITTOIA 2005 is amended as follows.

(2) In section 373(2) (open-ended investment company interest distributions) for “subsections (6) and (7)” substitute “ subsection (7) ”.

(3) In section 376(2) (authorised unit trust interest distributions) for “subsections (6) and (7)” substitute “ subsection (7) ”.

Amendment of the Finance Act 2005 U.K.

92.—(1) The Finance Act 2005 M42 is amended as follows.

(2) In Schedule 2 (alternative finance arrangements: further provisions), omit paragraph 4.

Marginal Citations

M42 2005 c. 7.

CHAPTER 2 U.K. MODIFICATIONS OF THE TAX ACTS

Introduction U.K.

93.  In their application in relation to—

(a) authorised investment funds,

(b) shareholders or unit holders in authorised investment funds, and

(c) transactions involving authorised investment funds,

the Tax Acts have effect with the modifications specified in regulations 94 to 96.

[F14 Modifications of TMA 1970 U.K.

93A.— (1) TMA 1970 is modified as follows.

(2) In section 98(4E) (special returns etc.)—

(a) in paragraph (a) for “trustees of an authorised unit trust” substitute “legal owner of an authorised investment fund”;

(b) in paragraph (b)—

(i) for “trustees” substitute “legal owner”, and

(ii) for “do not comply” substitute “does not comply”; and

(c) in paragraph (d) for “trustees” substitute “legal owner”.]

Textual Amendments

F14 Reg. 93A inserted (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 5

Modifications of ICTA U.K.

94.—(1) ICTA is modified as follows.

(2) In section 402 (surrender of relief between members of groups and consortia) after subsection (3) the following subsection is treated as inserted—

“(3AA) For the purposes of this Chapter—

(a) an open-ended investment company cannot be either the surrendering company or the claimant company, and

(b) an authorised unit trust shall not be regarded as a company.”.

(3) In section 413 (interpretation of Chapter 4), in subsection (2), the following definitions are treated as inserted at the appropriate places—

““authorised unit trust” has the meaning given by section 468(6);

“open-ended investment company” has the meaning given by section 468A(2);”.

(4) In section 413 after subsection (3) the following subsection is treated as inserted—

“(3A) For the purposes of paragraph (a) of subsection (3) above an open-ended investment company cannot be the third company mentioned in that paragraph.”.

(5) In section 832 (interpretation of the Tax Acts) after subsection (2) [F15 the following subsection is treated as inserted] —

“(2A) The definition of “ordinary share capital” does not include the issued share capital of an open-ended investment company.”.

(6) In section 834 (interpretation of the Corporation Tax Acts), in subsection (3), the words “ except in so far as regulations made under section 17(3) of the Finance (No. 2) Act 2005 make other provision for dividends treated as paid by virtue of those Regulations ” are treated as substituted for the words from “except in so far as” to the end.

(7) In Schedule 20 (charities: qualifying investments and loans) after paragraph 6 the following paragraph is treated as inserted—

“6A.   Shares in an open-ended investment company.”.

Textual Amendments

F15 Words in reg. 94(5) substituted (6.4.2007) by The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2007 (S.I. 2007/794), regs. 1(1), 6

Modifications of FA 1996 U.K.

95.—(1) FA 1996 is modified as follows.

(2) In paragraph 4 of Schedule 10 (loan relationships: collective investment schemes: company holdings in unit trusts and offshore funds) M43 —

(a) in sub-paragraph (1)(a) the words “ , open-ended investment company ” are treated as inserted after the words “unit trust scheme”,

(b) in sub-paragraph (1)(b) the word “ , company ” is treated as inserted after the word “scheme”, and

(c) in sub-paragraph (4) the words “ or open-ended investment company ” are treated as inserted after the words “authorised unit trust”.

Marginal Citations

M43 Paragraph 4 was amended by paragraph 41 of Schedule 10 to the Finance Act 2004 (c. 12).

Modifications of ITTOIA 2005 U.K.

96.—(1) ITTOIA 2005 is modified as follows.

(2) The words “ , except in so far as regulations made under section 17(3) of the Finance (No. 2) Act 2005 make other provision for dividends treated as paid by virtue of those regulations ” are treated as inserted at the end of each of the provisions specified in paragraph (3).

(3) The provisions specified are—

(a) section 374(1) (date when open-ended investment company interest distributions made),

(b) section 376(1) (date when authorised unit trust interest distributions made),

(c) section 387(1) (date when open-ended investment company dividend distributions made), and

(d) section 390(1) (date when authorised unit trust dividend distributions made).

(4) In sections 375(1) (interpretation of sections 373 and 374) and 388(1) (interpretation of sections 386 and 387) the definition of “the OEIC Regulations” is treated as omitted.

(5) In those provisions, the following definitions are treated as substituted for the definitions of “open-ended investment company”, “owner of shares” and “umbrella company”—

““open-ended investment company” means a company incorporated in the United Kingdom to which section 236 of FISMA 2000 applies,

“owner of shares”, in relation to an open-ended investment company, has the meaning given in regulations made under section 17(3) of the Finance (No. 2) Act 2005, and

“umbrella company” has the meaning given by section 468A M44 of ICTA.”.

(6) In sections 375(3) and 388(3) the words “ regulations under section 17(3) of the Finance (No. 2) Act 2005 (as at 1st April 2006, see regulation 6(2) of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/[abcd])) ” are treated as substituted for the words from “Chapter 3 of Part 12 of ICTA” to the end.

Marginal Citations

M44 Section 468A was inserted by section 16 of the Finance (No. 2) Act 2005 (c. 22).

CHAPTER 3 U.K. MODIFICATIONS OF TCGA 1992

Preliminary U.K.

Introduction U.K.

97.  In its application in relation to—

(a) authorised investment funds,

(b) shareholders or unit holders in authorised investment funds, and

(c) transactions involving authorised investment funds

TCGA 1992 has effect with the modifications specified in regulations 98 to 110.

General U.K.

Application of TCGA 1992: general U.K.

98.—(1) TCGA 1992 has effect in relation to—

(a) open-ended investment companies,

(b) holdings in, and the assets of, such companies, and

(c) transactions involving such companies,

in like manner as the manner in which it has effect in relation to authorised unit trusts, to rights under, and the assets subject to, such trusts and to transactions for purposes connected with such trusts.

(2) References in TCGA 1992 to companies, to holdings in, and the assets of, companies and to transactions involving companies accordingly have effect (or do not have effect as the case may be) in relation to open-ended investment companies, to holdings in, and the assets of, such companies, and to transactions involving such companies, in like manner as the manner in which they have effect (or do not have effect) in relation to authorised unit trusts, to rights under, and the assets subject to, such trusts, and to transactions for purposes connected with such trusts.

(3) This regulation has effect subject to the other modifications contained in this Chapter.

General modifications of TCGA 1992 U.K.

General modifications: introduction U.K.

99.  The modifications specified in regulations 100 to 104 have effect subject to the modifications specified in regulations 105 to 110.

General modification: authorised unit trust U.K.

100.—(1) The modifications specified in this regulation are that references, however expressed, in TCGA 1992 to—

(a) an authorised unit trust (other than references in a definition of an authorised unit trust, an unauthorised unit trust or a unit trust scheme),

(b) a unit trust scheme as denoting or including (whether expressly or by implication) an authorised unit trust (other than references in a definition of an authorised unit trust, an unauthorised unit trust or a unit trust scheme),

(c) the trustees of an authorised unit trust within sub-paragraph (a) or of a unit trust scheme within sub-paragraph (b),

have effect as if they included references to an open-ended investment company.

(2) Paragraph (1) does not apply—

(a) to references in any of the provisions specified in paragraph (3), or

(b) to references to provisions which include reference, whether made expressly or by implication, to an open-ended investment company.

(3) The provisions specified are—

(a) section 99(1) (application of Act to unit trust scheme),

(b) section 99A (authorised unit trusts: treatment of umbrella schemes),

(c) section 100(2) (exemption for units in unit trust scheme), and

(d) section 272(5) (valuation of rights of unit holders).

General modification: manager of authorised unit trust U.K.

101.—(1) The modifications specified in this regulation are that references, however expressed, in TCGA 1992 to the manager of an authorised unit trust or of a unit trust scheme within regulation 100(1)(b) have effect as if they included references to the authorised corporate director of the open-ended investment company concerned.

(2) Paragraph (1) does not apply—

(a) to section 272(5) (valuation of rights of unit holders), or

(b) to references in provisions which include reference, whether made expressly or by implication, to the authorised corporate director of an open-ended investment company.

General modification: unit in authorised unit trust U.K.

102.—(1) The modifications specified in this regulation are that references, however expressed, in TCGA 1992 to—

(a) a unit or an interest in, or rights under, an authorised unit trust,

(b) a unit or an interest in, or rights under, a unit trust scheme within regulation 100(1)(b), or

(c) an entitlement to a share of, or in, the investments subject to the trusts of an authorised unit trust or a unit trust scheme within regulation 100(1)(b),

have effect as if they included references to a share in the open-ended investment company concerned.

(2) Paragraph (1) does not apply—

(a) to section 99(1) (application of Act to unit trust scheme),

(b) to section 99A (authorised unit trusts: treatment of umbrella schemes),

(c) to section 272(5) (valuation of rights of unit holders), or

(d) to references in provisions which include reference, whether made expressly or by implication, to shares in, or an owner of shares in, an open-ended investment company.

General modification: accumulation units in authorised unit trusts U.K.

103.—(1) The modifications specified in this regulation are that references, however expressed, in TCGA 1992 to accumulation units in an authorised unit trust or in a unit trust scheme within regulation 100(1)(b) have effect as if they included references to accumulation shares in an open-ended investment company.

(2) In paragraph (1) “accumulation shares in an open-ended investment company” means shares in the company in respect of which income is credited periodically to the capital part of the scheme property of the company.

General modification: holder of unit in authorised unit trust U.K.

104.—(1) The modifications specified in this regulation are that references, however expressed, in TCGA 1992 to the holder of a unit within regulation 102(1) (other than references in a definition of a unit holder) have effect as if they included references to the owner of a share in the open-ended investment company concerned.

(2) Paragraph (1) does not apply—

(a) to section 99(1) (application of Act to unit trust scheme),

(b) to section 99A (authorised unit trusts: treatment of umbrella schemes),

(c) to section 272(5) (valuation of rights of unit holders), or

(d) to references in provisions which include reference, whether made expressly or by implication, to shares in, or an owner of shares in, an open-ended investment company.

Specific modifications of TCGA 1992 U.K.

Modification of section 99 of TCGA 1992 U.K.

105.  In section 99 of TCGA 1992 (application of Act to unit trust schemes) M45 , in subsection (2), the words “ sections 99A and 99AA ” are treated as substituted for “section 99A”.

Marginal Citations

M45 Section 99 was relevantly amended by section 118(2) of the Finance Act 2004 (c. 12).

Insertion of section 99AA of TCGA 1992 U.K.

106.  After section 99A of TCGA 1992 M46 the following section is treated as inserted—

“99AA.    Open-ended investment companies: treatment of umbrella companies

(1) In this section an “umbrella company” has the meaning given by section 468A(4) of the Taxes Act M47 , and a reference to a part of an umbrella company is to be construed in accordance with that provision.

(2) For the purposes of this Act (except subsection (1))—

(a) each of the parts of an umbrella company shall be regarded as an open-ended investment company, and

(b) the umbrella company as a whole shall not be so regarded (and shall not, unless express provision is made otherwise, be regarded as a company).

(3) In this Act, in relation to a part of an umbrella company, any reference, however expressed, to an owner of shares in an open-ended investment company is to a person for the time being having rights in the separate pool to which the part of the umbrella company relates.

(4) Nothing in subsection (2) or (3) shall prevent—

(a) gains accruing to an umbrella company being regarded as gains accruing to an open-ended investment company for the purposes of section 100(1) (exemption for authorised unit trusts etc);

(b) a transfer of business to an umbrella company being regarded as a transfer to an open-ended investment company for the purposes of section 139(4) (exclusion of transfers to authorised unit trusts etc).”.

Marginal Citations

M46 Section 99A was inserted by section 118(3) of the Finance Act 2004.

M47 Section 468A was inserted by section 16 of the Finance (No. 2) Act 2005 (c. 22).

Modification of section 170 of TCGA 1992 U.K.

107.  In section 170 of TCGA 1992 (groups of companies: interpretation), after subsection (4), the following subsection is treated as inserted—

“(4A) An open-ended investment company cannot be the principal company of a group.”.

Modifications of section 272 of TCGA 1992 U.K.

108.—(1) Section 272 of TCGA 1992 (valuation: general) is modified as follows.

(2) In subsection (3)(a) the words “ where a single price is shown in the quotations for the shares or securities in The Stock Exchange Daily Official List on the relevant date, that price, or ” are treated as inserted after “2 figures, or”.

(3) After subsection (5) the following subsection is treated as inserted—

“(5AA) In this Act “market value” in relation to shares of a given class in an open-ended investment company the prices of which are published regularly by the authorised corporate director of that company (whether or not those shares are also quoted in The Stock Exchange Daily Official List) shall mean an amount equal to the price so published on the relevant date, or if no price was published on that date, on the latest date before that date.”.

Modifications of section 288 of TCGA 1992 U.K.

109.—(1) Section 288 of TCGA 1992 (interpretation) M48 is modified as follows.

(2) In subsection (1)—

(a) in the definition of “collective investment scheme”, the words “ sections 99A and 99AA ” are treated as substituted for “section 99A”, and

(b) the following definitions are treated as inserted at the appropriate places in alphabetical order—

““authorised corporate director” has the meaning given in regulations made under section 17(3) of the Finance (No. 2) Act 2005 (as at 1st April 2006, see regulation 8 of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/[abcd]));”

““open-ended investment company” has the meaning given in regulations made under section 17(3) of the Finance (No. 2) Act 2005 (as at 1st April 2006, see regulation 4 of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/[abcd]));”

““owner of shares” has the meaning given in regulations made under section 17(3) of the Finance (No. 2) Act 2005 (as at 1st April 2006, see regulation 8 of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/[abcd]));”.

Marginal Citations

M48 Section 288 was relevantly amended by section 118(4) of the Finance Act 2004.

Modification of Schedule A1 to TCGA 1992 U.K.

110.  In Schedule A1 to TCGA 1992 (application of taper relief), in paragraph 16(2) (special rules for postponed gains) M49 , at the end of paragraph (f) the word “ , or ” is treated as added and the following paragraph is then also treated as added—

“(g) regulations 67(4) and 68(4) of the Authorised Investment Funds (Tax) Regulations 2006.”.

Marginal Citations

M49 Schedule A1 was inserted by Schedule 20 to the Finance Act 1998 (c. 36).

PART 8 U.K. FINAL PROVISIONS

Instruments revoked U.K.

111.  The following statutory instruments are revoked—

• The Open-ended Investment Companies (Tax) Regulations 1997 M50 ;

• The Open-ended Investment Companies (Tax) (Amendment) Regulations 1997 M51 ;

• The Open-ended Investment Companies (Tax) (Amendment) Regulations 2002 M52 ;

• The Open-ended Investment Companies (Tax) (Amendment) Regulations 2003 M53 .

Marginal Citations

M50 S.I. 1997/1154.

M51 S.I. 1997/1715.

M52 S.I. 2002/1973.

M53 S.I. 2003/1831.

Gillian Merron

Joan Ryan

Two of the Lords Commissioners of Her Majesty's Treasury