The Authorised Investment Funds (Tax) Regulations 2006

[F1 CHAPTER 2 U.K. ENTRY INTO AND MEMBERSHIP OF THE TAX ELECTED FUNDS REGIME

Textual Amendments

F1 Pt. 4B inserted (1.9.2009) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2009 (S.I. 2009/2036), regs. 1, 24

Conditions of membership of the Tax Elected Funds regime U.K.

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

69Z45.   In order for this Part to apply to an authorised investment fund in respect of an accounting period—

(a) the following conditions (the “TEF conditions”) must be met—

(i) the property condition (see regulation 69Z46);

(ii) the genuine diversity of ownership condition (see regulation 9A);

(iii) the loan creditor condition (see regulation 694Z47); and

(iv) the scheme documentation condition (see regulation 69Z48); and

(b) an application for this Part to apply must be accepted by HM Revenue and Customs (see regulations 69Z49 to 69Z53).

The TEF conditions U.K.

The property condition U.K.

69Z46.   The property condition is that the authorised investment fund does not have a UK property business or an overseas property business.

The loan creditor condition U.K.

69Z47.— (1)  The loan creditor condition is that the authorised investment fund must meet conditions A to C throughout the accounting period in the case of any loan relationship to which the fund is party as a debtor.

(2) Condition A is that, in the case of a debtor relationship of the fund, 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 authorised investment fund’s business, or

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

(3) For the purposes of condition A, a loan shall not be treated as dependent on the results of the fund’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 fund, 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 fund, 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 Part 5 of CTA 2009 (loan relationships).

The scheme documentation condition U.K.

69Z48.   The scheme documentation condition is that the instrument constituting the authorised investment fund and its prospectus must include provisions which require the fund to meet the property condition and the loan creditor condition on entry and throughout the accounting period.

Application for this Part to apply U.K.

Application process U.K.

69Z49.— (1)  An application for this Part to apply to an authorised investment fund may be made by—

(a) the manager of an existing authorised investment fund, or

(b) if it is proposed to establish an authorised investment fund, the person expected to become the manager of the fund once established (the “applicant”).

(2) Before making an application in relation to an existing authorised investment fund, the fund must obtain any necessary shareholder or unit holder approval and must have applied for any necessary regulatory approval in respect of the instrument constituting the fund and the prospectus.

(3) The manager or applicant must notify HM Revenue and Customs when any necessary regulatory authorisation has been given.

(4) Where in relation to an existing authorised investment fund this Part has previously applied to the fund—

(a) no application may be made if a termination notice was issued in relation to the fund, or

(b) if an election was made under regulation 69Z70 that this Part should cease to apply, no application can be made in relation to any accounting period which begins within six years of the cessation.

(5) In this Part—

“applicant” means the person referred to in paragraph (1)(b);

“application” means an application under this regulation;

“existing fund application” means an application made under paragraph (1)(a); and

“future fund application” means an application made under paragraph (1)(b).

Form and timing of application under regulation 69Z49 U.K.

69Z50.— (1)  An application must be made in writing to the Commissioners.

(2) An existing fund application must be received by HM Revenue and Customs at least 28 days before the beginning of the specified accounting period (see regulation 69Z51(2)).

This is subject to paragraph (8).

(3) A future fund application must be received by HM Revenue and Customs at least 42 days before the date the fund is expected to be established and authorisation given.

This is subject to paragraph (9).

(4) Within a period of 28 days (or 14 days in the case of an application within paragraph (8) or (9)) beginning on the day on which the application is received, HM Revenue and Customs must—

(a) notify the manager or applicant that the application is accepted, or

(b) issue a refusal notice.

(5) An application may be withdrawn or amended at any time before it is accepted—

(a) by the manager (in the case of an existing fund application), or

(b) by the applicant (in the case of a future fund application).

(6) If an application is amended before it is accepted, regulation 69Z49 shall apply to the amended application.

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

(8) An existing fund application may be received by HM Revenue and Customs at least 14 days before the beginning of the specified accounting period if—

(a) HM Revenue and Customs have given clearance under regulation 9B, and

(b) the manager of the authorised investment fund certifies that there have been no changes in substance between—

(i) the form in which the instrument constituting the fund 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 accounting period.

(9) A future fund application may be received by HM Revenue and Customs at least 14 days before the proposed fund is authorised and established if—

(a) HM Revenue and Customs have given clearance under regulation 9B, and

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

(i) the form in which the instrument constituting the fund 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 fund is authorised.

Contents of application under regulation 69Z49 U.K.

69Z51.— (1)  An application must include the following information.

(2) An existing fund application must specify the accounting period from the beginning of which the application seeks to apply this Part to the fund (the “specified accounting period”).

(3) An existing fund application must be accompanied by—

(a) a statement by the manager of the authorised investment fund that the TEF conditions are reasonably expected to be met in respect of the fund throughout the specified accounting period;

(b) the following documents relating to the fund—

(i) the instrument constituting the fund, and

(ii) its prospectus;

(c) a statement by the manager as to whether or not this Part has previously applied to the fund and where this Part has previously applied that statement must include—

(i) the dates of entry and cessation, and

(ii) a statement by the manager that a termination notice has never been issued in respect of the fund;

(d) a statement by the manager that either—

(i) shareholder or unit holder consent to the application is not required, or

(ii) shareholder or unit holder consent has been given, in which case the statement must specify the date of the shareholder or unit holder resolution giving consent;

(e) a copy of the application to the [F2 appropriate regulator] for approval for any changes in the instrument constituting the fund and its prospectus; and

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

(4) A future fund application must specify the date it is expected the fund will be established and authorisation given and seek to apply this Part to the proposed fund from that date.

(5) A future fund application must be accompanied by—

(a) a statement by the applicant that the TEF conditions are reasonably expected to be met in respect of the proposed fund throughout its first accounting period;

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

(i) the proposed instrument constituting the fund, and

(ii) its F3 ... prospectus F4 ... ;

(c) a copy of the application to the [F5 appropriate regulator] for authorisation of the proposed fund as an authorised investment fund; 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).

Textual Amendments

F2 Words in reg. 69Z51(3)(e) substituted (1.4.2013) by The Financial Services Act 2012 (Consequential Amendments and Transitional Provisions) Order 2013 (S.I. 2013/472), Sch. 2 para. 115(b)

F3 Word in reg. 69Z51(5)(b)(ii) omitted (with effect in accordance with reg. 1(2) of the amending S.I.) by virtue of The Authorised Investment Funds (Tax) (Amendment) Regulations 2010 (S.I. 2010/294), regs. 1(1), 23(4)(a)

F4 Words in reg. 69Z51(5)(b)(ii) omitted (with effect in accordance with reg. 1(2) of the amending S.I.) by virtue of The Authorised Investment Funds (Tax) (Amendment) Regulations 2010 (S.I. 2010/294), regs. 1(1), 23(4)(b)

F5 Words in reg. 69Z51(5)(c) substituted (1.4.2013) by The Financial Services Act 2012 (Consequential Amendments and Transitional Provisions) Order 2013 (S.I. 2013/472), Sch. 2 para. 115(b)

Procedural matters relating to the making of applications for this Part to apply U.K.

Refusing an application: refusal notice U.K.

69Z52.— (1)  If any of conditions A to C are met HM Revenue and Customs must refuse the application and give a notice (a “refusal notice”)—

(a) to the manager of the authorised investment fund if an existing fund application has been made, or

(b) to the applicant if a future fund application has been made.

(2) Condition A is that—

(a) the documents supplied do not demonstrate that the authorised investment fund (or the proposed authorised investment fund) will meet all the TEF conditions, or

(b) the statement given in accordance with regulation 69Z51(3)(a) or (5)(a) does not demonstrate that the fund (or proposed fund) can reasonably be expected to meet all the TEF conditions throughout the specified accounting period or the first accounting period.

(3) Condition B is that the application is not accompanied by the documents and statements specified in regulation 69Z51(3) in the case of an existing fund application or regulation 69Z51(5) in the case of a future fund application.

(4) Condition C is that any necessary shareholder, unit holder or regulatory authorisation or approval has not been given.

(5) A refusal notice must specify the reason for refusing the application.

Appeal against refusal notice U.K.

69Z53.— (1)  A person to whom a refusal notice is given may appeal.

(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 refusal notice is given.

(3) On an appeal that is notified to the tribunal, the tribunal shall determine whether it was just and reasonable for HM Revenue and Customs to give the refusal notice.

(4) If the tribunal allow the appeal—

(a) they may direct that this Part shall apply to the authorised investment fund (or, as the case may be, to the proposed authorised investment fund), 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 fund application has been made, and

(b) must not be earlier than the date of authorisation by the [F6 appropriate regulator] if a future fund application has been made.

Textual Amendments

F6 Words in reg. 69Z53(5)(b) substituted (1.4.2013) by The Financial Services Act 2012 (Consequential Amendments and Transitional Provisions) Order 2013 (S.I. 2013/472), Sch. 2 para. 115(b)

Consequences of entry U.K.

Effects of entry U.K.

69Z54.   On entry a new distribution period of the authorised investment fund shall begin.

Duration U.K.

69Z55.   Once this Part has begun to apply to an authorised investment fund it shall continue to apply unless and until it ceases to apply in accordance with Chapter 7 of this Part.]