The Authorised Investment Funds (Tax) Regulations 2006
PART 1PRELIMINARY PROVISIONS AND INTERPRETATION
Preliminary provisions
1Citation, commencement and effect
2Structure of these Regulations
Interpretation
3Definition of “authorised investment funds”
4Definition of “open-ended investment company”
5Interpretation of expressions relating to authorised unit trust schemes
6Further definitions generally relevant for authorised investment funds
7Umbrella companies and umbrella schemes: interpretation
8General interpretation
9Abbreviations and general index
PART 1ATHE GENUINE DIVERSITY OF OWNERSHIP CONDITION
9AThe genuine diversity of ownership condition
9BClearance in relation to the genuine diversity of ownership condition
PART 2THE TAX TREATMENT OF AUTHORISED INVESTMENT FUNDS
Loan relationships and derivative contracts: exclusion of capital profits, gains or losses
10General rule for loan relationships: exclusion of capital profits, gains or losses
11General rule for derivative contracts: exclusion of capital profits, gains or losses
12Accounts prepared in accordance with UK generally accepted accounting practice
Loan relationships: treatment of Interest distributions and deficits
12ADeduction of expenses
13Treatment of interest distributions for purposes of loan relationships
14Treatment of deficits on loan relationships
Authorised investment funds having interests in offshore non-reporting funds
14ZAInterests in offshore non-reporting funds: general
14ZBTreatment of disposal of interest in non-reporting fund
14ZCTreatment of interest in non-reporting fund: cases where the conditions in regulation 14ZA(2) would not be satisfied
Treatments applying to authorised investment funds with specific investment purposes
14ZDIndex tracking funds
14AAuthorised investment funds with limited investment powers – stamp duty reserve tax
PART 2AQualified Investor Schemes
14BTax treatment of qualified investor schemes
14CThe genuine diversity of ownership condition
14DClearance in relation to the genuine diversity of ownership condition
PART 2BDIVERSELY OWNED AIFS
14ETax treatment of diversely owned AIFs
14FMeaning of “investment transaction”
14GMeaning of relevant contracts: general
14HMeaning of relevant contract: options
14IMeaning of relevant contract: futures
14JMeaning of relevant contract: options and futures - general provisions
14KMeaning of relevant contract: contract for differences
14LLoan relationships or related transactions
14MUnits in a collective investment scheme
14NCarbon emission trading products
PART 3DISTRIBUTIONS MADE BY AUTHORISED INVESTMENT FUNDS
Preliminary
15Interpretation
16Funds excluded from the ambit of this Part
Distribution accounts: general
17Allocation of income
Interest distributions
18Interest distributions: general
19The qualifying investments test
20Meaning of “qualifying investments”
21Meaning of “qualifying investments”: further provisions
Dividend distributions
22Dividend distributions: general
De minimis amounts
23Provisions applying if amounts available for distribution are de minimis
PART 4THE TREATMENT OF PARTICIPANTS IN AUTHORISED INVESTMENT FUNDS
CHAPTER 1PRELIMINARY PROVISIONS
24Structure of this Part
25Funds excluded from the ambit of this Part
CHAPTER 2PARTICIPANTS CHARGEABLE TO INCOME TAX
Deduction of tax from interest distributions: general
26Deduction of tax where interest distributions made
The reputable intermediary condition
27The reputable intermediary condition
28The reputable intermediary condition: further provisions
29Consequences of reasonable but incorrect belief
The residence condition
30The residence condition
31Residence declarations
32References to beneficiaries in regulations 30 and 31
33Interest distributions: the position of the legal owner
33AThe offshore marketing condition
The non-liability condition
34The non-liability condition
35Qualifying certificates
36The contents condition
37The supplier condition
38The time limit condition
39The continuing validity condition
40The qualifying circumstances condition
41The joint holding condition
42Qualifying certificates valid for only part of jointly held accounts: introductory
43Qualifying certificates valid for only part of jointly held accounts: the general rule
44Qualifying certificates valid for only part of jointly held accounts: further provisions
45Consequences of notice under regulation 39(6)
46Qualifying certificate not in writing
Annual payments to non-residents
46AAnnual Payments – duty to deduct income tax
46BConsequences of reasonable but incorrect belief
CHAPTER 3PARTICIPANTS CHARGEABLE TO CORPORATION TAX
Interest distributions
47The obligation to deduct tax
Dividend distributions
48General
48AIncome treated as an annual payment treated as foreign income
48BTax treated as deducted from a dividend distribution
49Calculation of unfranked part of dividend distribution
50References to gross income
51Participants chargeable to corporation tax: holdings in qualified investor schemes where scheme does not meet the genuine diversity of ownership condition
52Repayments of tax
52ACompanies carrying on general insurance business: treatment of certain amounts of tax as foreign tax
52BDiversely owned AIFs and financial traders: treatment of shares and units
52CFinancial traders: amounts to be brought into account in respect of shares or units held in diversely owned AIFs
52DShares and units not within regulation 52C
52EMeaning of financial trader
CHAPTER 4CHARGE TO TAX ON SUBSTANTIAL QIS HOLDINGS IN QUALIFIED INVESTOR SCHEMES
General
53Charge to tax under this Chapter
54Meaning of “substantial QIS holding”
55Amount charged to tax under this Chapter
56Measuring dates and meaning of “chargeable measuring date”
57How tax is charged under this Chapter: income tax
58How tax is charged under this Chapter: corporation tax
59Further provisions
The first measuring date
60The general rule
61Cases affected by the coming into force of these Regulations
62Cases involving the launch of qualified investor schemes
63Cases where a participant's holding becomes substantial
64Definition of the “first measuring date”
65Calculation to be made on the first measuring date
Disposals of holdings
66Reorganisations etc.
67Disposal of part of a substantial QIS holding
68Disposal of the whole of a substantial QIS holding
69No gain/no loss disposals
PART 4APROPERTY AIFS
CHAPTER 1PRELIMINARY PROVISIONS
69AProperty AIFs
69BStructure of this Part
69CKey concepts
CHAPTER 2ENTRY INTO AND MEMBERSHIP OF THE PROPERTY AIF REGIME
Conditions of membership of the Property AIF regime
69DConditions for this Part to apply to company
69DAConditions for this Part to apply to a company where the company is also a qualified investor scheme
The property investment business condition
69EThe property investment business condition
69FMeaning of “property investment business”
69GProperty investment business: further provisions
69HMeaning of “property rental business”
69IMeaning of “intermediate holding vehicle”
The genuine diversity of ownership condition
69JThe genuine diversity of ownership condition
The corporate ownership condition
69KThe corporate ownership condition
69LThe corporate ownership condition: further provisions
The loan creditor condition
69MThe loan creditor condition
The balance of business conditions
69NThe balance of business conditions
The notification condition
69OThe notification condition
69PForm and timing of notice under regulation 69O
69QContents of notice under regulation 69O
Procedural matters relating to the giving of notice for this Part to apply
69RNotice: further provisions: quashing notices
69SProcedure relating to quashing notices
69TAppeal against quashing notice
Clearance applications
69UClearance in relation to the genuine diversity of ownership condition
Consequences of entry
69VEffects of entry
69WDuration
CHAPTER 3THE TAX TREATMENT OF PROPERTY AIFS
Categories of business
69XRing-fencing of tax-exempt business
Chargeability to tax
69YChargeability to corporation tax
69ZMeaning of “net income”
69Z1Calculation of net income of F (tax-exempt)
69Z2Components of income arising to F (residual)
69Z3Calculation of net income of F (residual)
Breaches of conditions
69Z4Breach of the genuine diversity of ownership condition
69Z5Breach of the corporate ownership condition
69Z6Breach of the loan creditor condition
69Z7Breach of balance of business conditions
69Z8Multiple breaches of separate conditions
Further provisions
69Z9Profit/financing costs in the case of a Property AIF that is a qualified investor scheme
69Z10Cancellation of tax advantage
69Z11Appeal against notice under regulation 69Z10
69Z12Distribution to holder of excessive rights: charge to tax
69Z13Meaning of “holder of excessive rights”
CHAPTER 4DISTRIBUTIONS MADE BY PROPERTY AIFS
69Z14Allocation of income
69Z15Property income distributions
69Z16PAIF distributions (interest)
69Z17PAIF distributions (dividends)
CHAPTER 5THE TREATMENT OF PARTICIPANTS IN PROPERTY AIFS
Treatment of distributions: liability to tax of participants
69Z18Property income distributions: liability to tax of participants
69Z19PAIF distributions (interest): liability to tax of participants
69Z20Property distributions (dividends): liability to tax of participants
69Z21Distributions made after cessation
Deduction of tax from distributions
69Z22Deduction of tax from property income distributions
69Z23Deduction of tax from PAIF distributions (interest)
69Z24Distribution payments to be made without deduction of tax
69Z24AManufactured dividends representing property income distributions
69Z24BManufactured dividends representing PAIF distributions (interest)
69Z24CManufactured dividends – PAIF distributions (dividends)
69Z24DInterpretation
Conversions and exchanges
69Z24EConversion to property AIF
69Z24FExchange of units
69Z24GFurther requirement
69Z24HApplication of section 137 of TCGA
CHAPTER 6COMPLIANCE IN RELATION TO THE PROPERTY AIF REGIME
Company tax return
69Z25Documents to be included with company tax return
Breaches of conditions in Chapter 2
69Z26Information to be provided by company to which this Part applies
Holders of excessive rights
69Z27Information relating to holders of excessive rights
Information about possible breaches of conditions of membership of Property AIF regime
69Z28Information to be provided to officers of Revenue and Customs
Accounting for tax deducted from property income distributions
69Z29Payments in an accounting period
69Z30Collection and payment of tax
69Z31Assessments where relevant distribution included in return
69Z32Assessments in other cases
69Z33Application of Income Tax Acts provisions about time limits for assessments
69Z34Certificates of deduction of tax
69Z35Company’s duty to deliver amended return
CHAPTER 7LEAVING THE PROPERTY AIF REGIME
69Z36Termination by notice: company
69Z37Termination by notice: Commissioners
69Z38Appeal against termination notice
69Z39Company ceasing to be authorised etc.
69Z40Mergers
69Z41Effects of cessation
PART 4BTAX ELECTED FUNDS
CHAPTER 1PRELIMINARY PROVISIONS
69Z42Tax Elected Funds
69Z43Structure of this Part
69Z44Interpretation
CHAPTER 2ENTRY INTO AND MEMBERSHIP OF THE TAX ELECTED FUNDS REGIME
Conditions of membership of the Tax Elected Funds regime
69Z45Conditions for this Part to apply to fund
The TEF conditions
69Z46The property condition
69Z47The loan creditor condition
69Z48The scheme documentation condition
Application for this Part to apply
69Z49Application process
69Z50Form and timing of application under regulation 69Z49
69Z51Contents of application under regulation 69Z49
Procedural matters relating to the making of applications for this Part to apply
69Z52Refusing an application: refusal notice
69Z53Appeal against refusal notice
Consequences of entry
69Z54Effects of entry
69Z55Duration
CHAPTER 3THE TAX TREATMENT OF TAX ELECTED FUNDS
69Z56Components of income
69Z57Treatment of property investment income
69Z58Treatment of distributions
CHAPTER 4DISTRIBUTIONS MADE BY TAX ELECTED FUNDS
69Z59Allocation of income
69Z60TEF distributions (dividends)
69Z61TEF distributions (non-dividend)
CHAPTER 5THE TREATMENT OF PARTICIPANTS IN TAX ELECTED FUNDS
TEF distribution (dividend)
69Z62Participants chargeable to corporation tax
TEF distributions (non-dividend)
69Z63Obligation to deduct tax from TEF distributions (non-dividend)
69Z64Modification of section 490 of CTA 2009
CHAPTER 6COMPLIANCE IN RELATION TO THE TAX ELECTED FUNDS REGIME
Breaches of TEF conditions
69Z65Breach of conditions: general
69Z66Breach of the property condition, genuine diversity of ownership condition or scheme documentation condition
69Z67Breach of the loan creditor condition
69Z68Multiple breaches of separate conditions
Information about possible breaches of the TEF conditions
69Z69Information to be provided to officers of Revenue and Customs
CHAPTER 7LEAVING THE TAX ELECTED FUNDS REGIME
69Z70Termination by election: authorised investment fund
69Z71Termination by notice: Commissioners
69Z72Appeal against termination notice
69Z73Mergers
PART 5COMPLIANCE
Information relating to distributions
70Application of section 234A of ICTA
Interest distributions and TEF distributions (non-dividend)
71Notification of interest distributions and TEF distributions (non-dividend) made without deduction of tax
72Information about interest distributions and TEF distributions (non-dividend) made without deduction of tax
73Inspection of records
74Use of information
Residence declarations
75Inspection of residence declarations
PART 6FURTHER PROVISIONS RELATING TO AUTHORISED INVESTMENT FUNDS
CHAPTER 1GENERAL
76Ownership of shares of different denominations in open-ended investment companies
77Non-discrimination in respect of different classes of shares
CHAPTER 2AMALGAMATION OF AN AUTHORISED UNIT TRUST WITH, AND CONVERSION OF AN AUTHORISED UNIT TRUST TO, AN OPEN-ENDED INVESTMENT COMPANY
78Circumstances in which this Chapter applies
79Ending of accounting period of the target trust
80Carrying forward of excess management expenses
81Distributions by authorised unit trust after the end of its pre-transfer accounting period
82Continuing validity of residence declarations
83Powers of the acquiring company
84Assessments made on discovery
85Prevention of double relief
PART 6AFUNDS INVESTING IN NON-REPORTING OFFSHORE FUNDS
CHAPTER 1Preliminary Provisions
85AFINROFs
85BStructure of this Part
85CInterpretation
85DThe investment condition
85EInterests in funds treated as not being interests in non-reporting funds
85FElective FINROFs
CHAPTER 2Entry into Funds Investing in Non-Reporting Offshore Fund (“FINROF”) regime
85GEntry into FINROF regime: the basic rule
85HThe requirement to notify where regulation 85D is satisfied
85IThe requirement to notify participants when a fund enters the FINROF regime
85JInadvertent fulfilment of investment condition
85KAppeal against refusal to provide written notice
85LDisposal of an interest in an authorised investment fund prior to its becoming a FINROF
CHAPTER 3Tax treatment of FINROFs and of participants in FINROFs
The charge to tax
85MThe charge to tax: general provisions
85NThe charge to tax: further provisions
85OApplication of certain provisions of TCGA 1992
85PApplication of section 10A of TCGA 1992
CHAPTER 4Exceptions, etc from the charge to tax
85QExceptions from the charge to tax
85RTrading stock etc.
85SLong-term insurance funds of insurance companies
85TCharitable companies and charitable trusts
CHAPTER 5Disposal of units in FINROFs
85UApplication of this Chapter
85VDisposal of an asset: the basic rule
85WProvisions applicable on death
85XApplication of section 135 of TCGA 1992
85YApplication of section 136 of TCGA 1992
CHAPTER 6Income gains and computation of income gains
85ZGeneral provisions
85Z1The basic gain and its computation
85Z2Earlier disposal to which the no gain/no loss basis applies
85Z3Modifications of TCGA 1992
85Z4Losses
CHAPTER 7Deduction of income gains in computing chargeable gains
85Z5Scope of this Chapter
85Z6Treatment of the TCGA disposal: general rules
85Z7Modification of section 162 TCGA 1992
85Z8Application of section 128 of TCGA 1992
CHAPTER 8Leaving the FINROF regime
85Z9Leaving the FINROF regime
85Z10Requirement to notify participants when a fund leaves the FINROF regime
85Z11Participant’s power to elect for deemed disposal
PART 7CONSEQUENTIAL AMENDMENTS AND MODIFICATIONS OF ENACTMENTS
CHAPTER 1AMENDMENTS OF REFERENCES TO REPEALED ENACTMENTS
86Introduction
87Amendments of TMA 1970
88Amendment of ICTA
89Amendment of TCGA 1992
90Amendment of FA 1996
91Amendments of ITTOIA 2005
92Amendment of the Finance Act 2005
CHAPTER 2MODIFICATIONS OF THE TAX ACTS
93Introduction
93AModifications of TMA 1970
94Modifications of ICTA
95Modifications of FA 1996
96Modifications of ITTOIA 2005
96AModification of CTA 2009
CHAPTER 3MODIFICATIONS OF TCGA 1992
Preliminary
97Introduction
General
98Application of TCGA 1992: general
General modifications of TCGA 1992
99General modifications: introduction
100General modification: authorised unit trust
101General modification: manager of authorised unit trust
102General modification: unit in authorised unit trust
103General modification: accumulation units in authorised unit trusts
104General modification: holder of unit in authorised unit trust
Specific modifications of TCGA 1992
105Modification of section 99 of TCGA 1992
106Insertion of section 99AA of TCGA 1992
107Modification of section 170 of TCGA 1992
108Modifications of section 272 of TCGA 1992
109Modifications of section 288 of TCGA 1992
110Modification of Schedule A1 to TCGA 1992
PART 8FINAL PROVISIONS
111Instruments revoked
SCHEDULEAbbreviations and Defined Expressions
PART 1Abbreviations of Acts
PART 2Index of expressions defined or otherwise explained in these Regulations
2006 No. 964
INCOME TAX
CORPORATION TAX
CAPITAL GAINS TAX

The Authorised Investment Funds (Tax) Regulations 2006

Made
Coming into force

The Treasury, in exercise of the powers conferred upon them by sections 17(3) and 18 of the Finance (No. 2) Act 2005 M1 and section 152 of the Finance Act 1995 M2 make the following Regulations: