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The Authorised Investment Funds (Tax) Regulations 2006

Type Statutory-Instrument

Publication 2006-03-29

Last updated 2021-12-09

State In force

Department King's Printer of Acts of Parliament

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Made: 29th March 2006

Coming into force: 1st April 2006

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

PART 1 — PRELIMINARY PROVISIONS AND INTERPRETATION

Preliminary provisions

Citation, commencement and effect

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

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

Structure of these Regulations

2

The structure of these Regulations is as follows—

this Part contains preliminary provisions and provides for interpretation;

Part 1A deals with the genuine diversity of ownership condition;

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

Part 2A deals with qualified investor schemes

Part 2B deals with diversely owned AIFs;

Part 3 deals with distributions made by authorised investment funds;

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

Part 4A deals with Property AIFs;

Part 4B deals with Tax Elected Funds;

Part 5 deals with compliance;

Part 6 contains further provisions relating to authorised investment funds;

Part 6A contains provisions relating to Funds Investing in Non-Reporting Offshore Funds (FINROFs);

Part 7 contains consequential amendments and modifications of enactments; and

Part 8 contains final provisions.

Interpretation

Definition of “authorised investment funds”

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”

4

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

Interpretation of expressions relating to authorised unit trust schemes

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

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.

(7) In these Regulations “instrument constituting the fund” means—

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

(b) in relation to an authorised unit trust scheme, the trust deed.

(8) In these Regulations “genuine diversity of ownership condition” has the meaning given by regulation 9A.

Umbrella companies and umbrella schemes: interpretation

7

(1) In these Regulations “umbrella company” has the meaning given by section 468A(4) of ICTA , 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 ... 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 ... 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 ... of an authorised unit trust have effect, for the purposes of these Regulations, as references to such parts of that prospectus ... as apply to that part of the umbrella scheme.

General interpretation

8

In these Regulations—

“appropriate regulator” in relation to a person means—in a case where the person is a PRA-authorised person (within the meaning of the Financial Services and Markets Act 2000), the Prudential Regulation Authority or the Financial Conduct Authority;in any other case, the Financial Conduct Authority;

“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;

“connected person” has the meaning given in—sections 993 and 994 of ITA 2007 (connected persons) in the case of a person chargeable to income tax, andsection 839 of ICTA (connected persons) in the case of a person chargeable to corporation tax;

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

“derivative contract” means—a contract which is a derivative contract within the meaning of Schedule 26 to FA 2002 , ora 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 (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;

“non-reporting fund” has the same meaning as in regulation 4(2) of the Offshore Funds Regulations;

“offshore fund” means a fund within the meaning of section 355 of the Taxation (International and Other Provisions) Act 2010;

“Offshore Funds Regulations” means the Offshore Funds (Tax) Regulations 2009;

“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;

“prospectus” includes a proposed prospectus, supplements to a prospectus and supplements to a proposed prospectus;

“reportable income” has the same meaning as in Chapter 5 of Part 3 of the Offshore Funds Regulations;

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

“reporting fund” means an offshore fund to which Part 3 of the Offshore Funds Regulations applies

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

“Statement of Recommended Practice” means, 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 in November 2008;

“tax year”—in relation to income tax, means a year of assessment within the meaning of ICTA (see section 832(1) of that Act), andin relation to capital gains tax, means a year of assessment within the meaning of TCGA 1992 (see section 288(1) of that Act).

“tribunal” means the First-tier Tribunal or, where determined by or under Tribunal Procedure Rules, the Upper Tribunal.

Abbreviations and general index

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 — THE TAX TREATMENT OF AUTHORISED INVESTMENT FUNDS

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

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

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 (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.

(4) This regulation is subject to regulation 14B (tax treatment of qualified investor schemes.

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

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 (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.

(4) This regulation is subject to regulation 14B (tax treatment of qualified investor schemes).

Accounts prepared in accordance with UK generally accepted accounting practice

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 the heading “net capital 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

... Interest distributions and deficits

Treatment of interest distributions for purposes of loan relationships

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.

(1A) But paragraph (1) only applies to the extent that the interest distribution is derived from income other than income chargeable to corporation tax in accordance with Part 4 of CTA 2009 and in respect of which the legal owner is charged to corporation tax.

(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 and regulation 14B (tax treatment of qualified investor schemes).

(4) In this regulation an “interest distribution” includes a TEF distribution (non-dividend) (see regulation 69Z61(3)).

Treatment of deficits on loan relationships

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 — DISTRIBUTIONS MADE BY AUTHORISED INVESTMENT FUNDS

Preliminary

Interpretation

15

(1) In these Regulations—

(a) “income allocation” means the distribution of an amount to participants; and

(b) “distribution” includes the crediting of an amount to the capital part of the scheme property 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 income allocation to participants is ascertained.

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

(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

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 , or

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

...

Contents of distribution accounts

17

(1) The total amount available for income allocation must be allocated in one of the following ways—

(a) for distribution as yearly interest (see regulations 18 to 21); or

(b) for distribution as dividends (see regulation 22).

(1A) Paragraph (1) does not apply in relation to an authorised investment fund to which Part 4A or 4B applies.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest distributions

Interest distributions: general

18

(1) Paragraph (2) applies where the total amount available for income allocation is allocated 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.

(2A) For the purposes of Part 10 (Corporate Interest Restriction) of TIOPA 2010, an interest distribution is treated as not being a tax-interest expense amount of the authorised investment fund.

(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

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”

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 1Money placed at interest.

Category 2Securities.

Category 3Shares in a building society.

Category 4Qualifying units in another authorised investment fund.

Category 4A Qualifying units in an offshore fund.

Category 5Derivative contracts whose underlying subject matter consists wholly of any one or more of the matters referred to in categories 1 to 4A and currency.

Category 6Contracts for differences whose underlying subject matter consists wholly of any one or more of interest rates, creditworthiness and currency.

Category 7Derivative contracts not within categories 5 or 6 where there is a hedging relationship between the derivative contract and an asset within categories 1 to 4A.

Category 8Alternative finance arrangements.

Meaning of “qualifying investments”: further provisions

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.

(5A) For the purpose of category 4A, units in an offshore fund are qualifying units at any time in the relevant period if, and only if, the offshore fund would itself (on the relevant assumption) satisfy the qualifying investments test throughout that period.

(5B) For the purposes of paragraph (5A), the relevant assumption is that the only investments of the offshore fund which are to be regarded as qualifying investments are those falling within categories 1 to 3 and 5 to 8.

(5C) In paragraph (5B), references to investments of an offshore fund—

(a) in the case of an offshore fund which is a company, are references to investments which are the investments of the company, but do not include cash awaiting investment, and

(b) in the case of any other offshore fund, are references to investments subject to the trust or other arrangements constituting the investments of the other offshore fund, but do not include 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 .

(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 .

(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 .

(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 .

Dividend distributions

Dividend distributions: general

22

(1) Paragraph (2) applies where the total amount available for income allocation is allocated 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 (but see regulation 96A (modification of CTA 2009)).

(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

Provisions applying if amounts available for distribution are de minimis

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 appropriate regulator, the authorised investment fund has an agreed de minimis limit.

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

(a) has calculated that the total income available for income allocations is a de minimis amount, and

(b) chooses to waive the allocation 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 (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 available for income allocation to participants does not exceed that amount, and

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

PART 4 — THE TREATMENT OF PARTICIPANTS IN AUTHORISED INVESTMENT FUNDS

CHAPTER 1 — PRELIMINARY PROVISIONS

Structure of this Part

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;

Funds excluded from the ambit of this Part

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 , or

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

CHAPTER 2 — PARTICIPANTS CHARGEABLE TO INCOME TAX

Deduction of tax from interest distributions: general

Deduction of tax where interest distributions made

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 874 of ITA 2007 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); ...

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

(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , or

(f) the offshore marketing condition is met with respect to the class of units in relation to which the distribution is made (see regulation 33A).

(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.

The reputable intermediary condition

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 ... 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

(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

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

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 ... resident in the United Kingdom.

(6) Section 350 of ICTA (charge to tax where payments made under section 349) and Schedule 16 to that Act (collection of income tax on company payments which are not distributions) have effect as if the deduction obligation applied.

The residence condition

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 ... 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 ... 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 ... 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 the person is 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 ... not resident in the United Kingdom.

Residence declarations

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

(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 ... 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 ... 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, ... resident in the United Kingdom.

References to beneficiaries in regulations 30 and 31

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

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 ... 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 ... in the United Kingdom.

The non-liability condition

34

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying certificates

35

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The contents condition

36

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The supplier condition

37

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The time limit condition

38

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The continuing validity condition

39

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The qualifying circumstances condition

40

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The joint holding condition

41

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

42

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

43

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

44

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consequences of notice under regulation 39(6)

45

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying certificate not in writing

46

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER 3 — PARTICIPANTS CHARGEABLE TO CORPORATION TAX

Interest distributions

The obligation to deduct tax

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

General

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) Subject to paragraphs (2A), (2B) and (2BA), 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 tax at a rate equal to the basic rate of income tax for the tax year in which the distribution date falls, from a corresponding gross amount.

(2A) But paragraph (2) does not apply to a dividend distribution to which Chapter 2 of Part 3 of CTA 2009 applies unless the dividend distribution is made to—

(a) an insurance company in respect of any non-BLAGAB long-term business carried on by it, or

(b) an insurance special purpose vehicle that is not an insurance company in respect of any long-term business carried on by it that does not consist wholly of PHI business.

Expressions used in paragraph (a) or (b) have the same meaning as they have in Part 2 of FA 2012.

(2B) If, on the distribution date, the participant is the manager of the authorised investment fund, paragraph (2) shall not apply to the extent that the rights in respect of which the dividend distribution is made are held by him in the ordinary course of the manager’s business as manager of the fund.

(2BA) Paragraph (2)(b) does not apply to so much of any dividend distribution as on a just and reasonable apportionment is attributable to an unallowable arrangement.

(2BB) For the purposes of paragraph (2BA), an unallowable arrangement is an arrangement the main purpose or one of the main purposes of which is to secure that an amount of tax, or an increased amount of tax, is treated as deducted under paragraph (2)(b).

(2BC) In paragraph (2BB), “arrangement” includes any arrangement, agreement, scheme, transaction, series of transactions or understanding (whether or not legally enforceable).

(2C) Regulation 48A makes provision in relation to the unfranked part of the dividend distribution treated as an annual payment under paragraph (2)(a) and regulation 48B makes provision in relation to the tax treated as deducted under paragraph (2)(b).

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

(4) This regulation does not apply in respect of a holding in a qualified investor scheme if the scheme has not met the genuine diversity of ownership condition in regulation 9A in relation to an accounting period.

Calculation of unfranked part of dividend distribution

49

(1) This is how to calculate the unfranked part of the dividend distribution—

$U=A×CD$

(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 derives from income in respect of which the legal owner is charged to corporation tax, as reduced by—any amount carried forward from an earlier accounting period and allowed as a deduction in computing the legal owner’s liability to corporation tax for the accounting period in which the last day of the distribution period falls, andan 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.

(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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

50

For the purposes of this Chapter, references to gross income are references to the net revenue before taxation determined in accordance with the Statement of Recommended Practice.

Cases where participant is the manager of the fund

51

(1) This regulation applies if—

(a) a participant has a holding in a qualified investor scheme or a long-term asset fund, and

(b) the scheme has not met the genuine diversity of ownership condition in regulation 9A in relation to an accounting period.

(2) Section 212 of TCGA 1992 (annual deemed disposal of holdings of unit trusts etc.) does not apply to the participant in relation to that accounting period.

(3) Paragraph 4 of Schedule 10 to FA 1996 (company holdings in unit trusts and offshore funds) shall not apply to the participant in relation to that accounting period.

Repayments of tax

52

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER 4 — CHARGE TO TAX ON SUBSTANTIAL QIS HOLDINGS IN QUALIFIED INVESTOR SCHEMES

General

Charge to tax under this Chapter

53

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “substantial QIS holding”

54

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount charged to tax under this Chapter

55

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measuring dates and meaning of “chargeable measuring date”

56

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

How tax is charged under this Chapter: income tax

57

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

How tax is charged under this Chapter: corporation tax

58

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Further provisions

59

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The first measuring date

The general rule

60

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cases affected by the coming into force of these Regulations

61

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cases involving the launch of qualified investor schemes

62

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cases where a participant's holding becomes substantial

63

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Definition of the “first measuring date”

64

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Calculation to be made on the first measuring date

65

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disposals of holdings

Reorganisations etc.

66

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disposal of part of a substantial QIS holding

67

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disposal of the whole of a substantial QIS holding

68

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

No gain/no loss disposals

69

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART 5 — COMPLIANCE

Information relating to distributions

Application of section 234A of ICTA

70

(1) Section 234A of ICTA (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).

(4) In the case of a Property AIF and a Tax Elected Fund, an appropriate statement for the purposes of section 234A of ICTA includes a written statement—

(a) showing the details specified in paragraph (5),

(b) providing details to allow the participant to access an electronic means of calculating the amounts that would be shown in a written statement that would, apart from this paragraph, be provided in accordance with subsection (6) (in the case of a PAIF distribution (interest) or a TEF distribution (non-dividend)) or subsection (7) (in the case of a PAIF distribution (dividends) or a TEF distribution (dividend)) of section 234A, and

(c) providing the participant with an alternative method of obtaining the details of those amounts without recourse to electronic means.

(5) The specified details are—

(a) the gross amount of the distribution made to the participant,

(b) the number and class of units held by the participant in respect of which the distribution is made,

(d) whether any tax has been deducted from the distribution,

(e) the date the distribution was made, and

(f) the percentage of the gross distribution attributable—

(i) in the case of a Property AIF, to PAIF distribution (interest) and to PAIF distribution (dividends), or

(ii) in the case of a Tax Elected Fund, to TEF distribution (dividend) and to TEF distribution (non-dividend).

Interest distributions and TEF distributions (non-dividend)

Notification of interest distributions made without deduction of tax

71

(1) If, during a tax year, an authorised investment fund has made interest distributions and TEF distributions (non-dividend) 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 .

(4) Sections 100A, 100B, 102, 103(4) and 118(2) of TMA 1970 apply to a penalty determined in accordance with paragraph (3).

Information about interest distributions and TEF distributions (non-dividend) made without deduction of tax

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 and TEF distributions (non-dividend) 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;

(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

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

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 or a TEF distribution (non-dividend) made without deduction of tax to whom the information obtained relates;

(d) where the whole of an interest distribution or a TEF distribution (non-dividend) 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 or a TEF distribution (non-dividend) 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 .

Residence declarations

Inspection of residence declarations

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 — FURTHER PROVISIONS RELATING TO AUTHORISED INVESTMENT FUNDS

CHAPTER 1 — GENERAL

Ownership of shares of different denominations in open-ended investment companies

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

77

(1) This regulation applies if there is an amount available for income allocation.

(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 ... 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 — 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

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

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

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 (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.

Distributions by authorised unit trust after the end of its pre-transfer accounting period

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 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.

Continuing validity of residence declarations

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

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

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

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

more than once in respect of the same amount or relief.

PART 7 — CONSEQUENTIAL AMENDMENTS AND MODIFICATIONS OF ENACTMENTS

CHAPTER 1 — AMENDMENTS OF REFERENCES TO REPEALED ENACTMENTS

Introduction

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

87

(1) TMA 1970 is amended as follows.

(2) In section 98 (penalties in relation to special returns)—

(a) in subsection (4E) 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 , and

(iii) at the end insert—

regulations under section 17(3) of the Finance (No. 2) Act 2005

Amendment of ICTA

88

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amendment of TCGA 1992

89

(1) TCGA 1992 is amended as follows.

(2) In section 99B(3) (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])) ”.

Amendment of FA 1996

90

(1) FA 1996 is amended as follows.

(2) In paragraph 4(4) of Schedule 10 (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])) ”.

Amendments of ITTOIA 2005

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

92

(1) The Finance Act 2005 is amended as follows.

(2) In Schedule 2 (alternative finance arrangements: further provisions), omit paragraph 4.

CHAPTER 2 — MODIFICATIONS OF THE TAX ACTS

Introduction

93

In their application in relation to—

(a) authorised investment funds,

(b) shareholders or unit holders in authorised investment funds, and

the Tax Acts have effect with the modifications specified in regulations 94 to 96A.

Modifications of ICTA

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.

(4A) After paragraph (b) of section 432A(1ZA) of ICTA (apportionment of income and gains), there is treated as inserted—

(ba) income from property income distributions to which regulation 69Z15 of the Authorised Investment Funds (Tax) Regulations 2006 apply (property income distributions by an open-ended investment company.

(5) In section 832 (interpretation of the Tax Acts) after subsection (2) 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.

Modifications of FA 1996

95

(1) FA 1996 is modified as follows.

(1A) In section 297 (trading credits and debits to be brought into account under Part 3) after subsection (1) the following subsections are treated as inserted—

(1A) For the purposes of subsection (1) a “diversely owned AIF is treated as being party to all of its loan relationships other than for the purposes of a trade carried on by it. (1B) In subsection (1A) “diversely owned AIF” has the meaning given by regulation 14E of the Authorised Investment Funds (Tax) Regulations 2006.

(1B) In section 573 (trading debits and credits to be brought into account under Part 3) after subsection (1) the following subsections are treated as inserted—

(1A) For the purposes of subsection (1) a diversely owned AIF is treated as being party to all of its derivative contracts other than for the purposes of a trade carried on by it. (1B) In subsection (1A) “diversely owned AIF” has the meaning given by regulation 14E of the Authorised Investment Funds (Tax) Regulations 2006.

(2) In paragraph 4 of Schedule 10 (loan relationships: collective investment schemes: company holdings in unit trusts and offshore funds)—

(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”,

(c) in sub-paragraph (4) the words “or open-ended investment company” are treated as inserted after the words “authorised unit trust”,

(d) in sub-paragraph (5) the words “scheme, fund or open-ended investment company” are treated as substituted for the words “scheme or fund”, and

(e) the following sub-paragraph is treated as inserted at the end—

(7) In this paragraph “open-ended investment company” has the same meaning as in sub-paragraph (7A)(b) of paragraph 8 below; and sub-paragraphs (7A) to (7D) of that paragraph apply for the purposes of this paragraph as they apply for the purposes of paragraph 8.

(3) In paragraph 8 of Schedule 10 (loan relationships: collective investment schemes: non-qualifying investments test)—

(a) in sub-paragraph (1)—

(i) the words “, open-ended investment company” are treated as inserted after the words “unit trust scheme”, and

(ii) the word “, company” is treated as inserted after the words “investments of the scheme”;

(b) in sub-paragraph (2)—

(i) the words “, open-ended investment company” are treated as inserted after the words “unit trust scheme”, and

(ii) the word “, company” is treated as inserted after the words “investments of the scheme”.

Modifications of ITTOIA 2005

96

(1) ITTOIA 2005 is modified as follows.

(1A) In the application of the provisions specified in paragraph (1B) in relation to a Property AIF and a Tax Elected Fund—

(a) for “the total” substitute “an”, and

(b) the amount available for distribution as PAIF distribution (interest) or TEF distribution (non-dividend), as the case may be, shall be treated as the amount available for distribution as yearly interest.

(1B) The specified provisions are—

(a) section 373(1) (open-ended investment company interest distributions), and

(b) section 376(1) (authorised unit trust interest distributions).

(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 377(1) (date when authorised unit trust interest distributions made),

(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, ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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.

CHAPTER 3 — MODIFICATIONS OF TCGA 1992

Preliminary

Introduction

97

In its application in relation to—

(a) authorised investment funds,

(b) shareholders or unit holders in authorised investment funds, and

General

Application of TCGA 1992: general

98

(1) TCGA 1992 has effect in relation to—

(a) open-ended investment companies,

(b) holdings in, and the assets of, such companies, and

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

General modifications: introduction

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

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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) section 272(5) (valuation of rights of unit holders).

General modification: manager of authorised unit trust

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

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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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

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.

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