The Authorised Investment Funds (Tax) Regulations 2006

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 M1 ;

(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 M2 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 M3 ;

(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 M4 .

Marginal Citations

M1 2004 c. 12.

M2 The definition of “insurance company” in section 431(2) was substituted by Article 26(3) of S.I. 2001/3629.

M3 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).

M4 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 M5 applies for the purposes of this regulation to determine whether persons are associates.

(3) Section 839 of ICTA M6 (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

M5 Section 417 was amended by paragraph 173 of Schedule 1 to the Income Tax (Trading and Other Income) Act 2005 (c. 5).

M6 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 M7 of ICTA.

Marginal Citations

M7 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.