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Link to original content: http://www.legislation.gov.uk/uksi/2006/964/contents/data.akn

2005 c. 22.

1995 c. 4; section 152 was amended by paragraph 13 of Schedule 19 to the Finance Act 1999 (c. 16) and Article 90 of S.I. 2001/3629.

http://www.legislation.gov.uk/uksi/2006/964/contentsThe Authorised Investment Funds (Tax) Regulations 2006texttext/xmlenINCOME TAXCORPORATION TAXCAPITAL GAINS TAXStatute Law Database2024-05-16Expert Participation2021-12-09In the Finance (No. 2) Act 2005 (c. 22) (“the 2005 Act”), Chapter 3 of Part 2 makes provision relating to authorised investment funds. Existing statutory provisions dealing with authorised investment funds cease to have effect on such day as the Treasury may appoint by order (see sections 17(1) and 19(1) of the 2005 Act). Arrangements are being made for the enactments specified in section 17(1) of the 2005 Act to be repealed.The Authorised Investment Funds (Tax) Regulations 2006The Authorised Investment Funds (Tax) Regulations 2006PART 1PRELIMINARY PROVISIONS AND INTERPRETATIONPreliminary provisions1Citation, commencement and effect2Structure of these RegulationsInterpretation3Definition of “authorised investment funds”4Definition of “open-ended investment company”5Interpretation of expressions relating to authorised unit trust schemes6Further definitions generally relevant for authorised investment funds7Umbrella companies and umbrella schemes: interpretation8General interpretation9Abbreviations and general indexPART 1ATHE GENUINE DIVERSITY OF OWNERSHIP CONDITION9AThe genuine diversity of ownership condition9BClearance in relation to the genuine diversity of ownership conditionPART 2THE TAX TREATMENT OF AUTHORISED INVESTMENT FUNDSLoan relationships and derivative contracts: exclusion of capital profits, gains or losses10General rule for loan relationships: exclusion of capital profits, gains or losses11General rule for derivative contracts: exclusion of capital profits, gains or losses12Accounts prepared in accordance with UK generally accepted accounting practice... Interest distributions and deficits12ADeduction of expenses13Treatment of interest distributions for purposes of loan relationships14Treatment of deficits on loan relationshipsAuthorised investment funds having interests in offshore non-reporting funds14ZAInterests in offshore non-reporting funds: general14ZBTreatment of disposal of interest in non-reporting fund14ZCTreatment of interest in non-reporting fund: cases where the conditions in regulation 14ZA(2) would not be satisfied14AAuthorised investment funds with limited investment powers – stamp duty reserve taxTreatments applying to authorised investment funds with specific investment purposes14ZDIndex tracking funds14AAuthorised investment funds with limited investment powers – stamp duty reserve taxPART 2AQualified Investor Schemes14BTax treatment of qualified investor schemes14CThe genuine diversity of ownership condition14DClearance in relation to the genuine diversity of ownership conditionPART 2AALONG-TERM ASSET FUNDS14DATax treatment of long-term asset fundsPART 2BDIVERSELY OWNED AIFS14ETax treatment of diversely owned AIFs14FMeaning of “investment transaction”14GMeaning of relevant contracts: general14HMeaning of relevant contract: options14IMeaning of relevant contract: futures14JMeaning of relevant contract: options and futures - general provisions14KMeaning of relevant contract: contract for differences14LLoan relationships or related transactions14MUnits in a collective investment scheme14NCarbon emission trading productsPART 3DISTRIBUTIONS MADE BY AUTHORISED INVESTMENT FUNDSPreliminary15Interpretation16Funds excluded from the ambit of this Part...17Allocation of incomeInterest distributions18Interest distributions: general19The qualifying investments test20Meaning of “qualifying investments”21Meaning of “qualifying investments”: further provisionsDividend distributions22Dividend distributions: generalDe minimis amounts23Provisions applying if amounts available for distribution are de minimisPART 4THE TREATMENT OF PARTICIPANTS IN AUTHORISED INVESTMENT FUNDSCHAPTER 1PRELIMINARY PROVISIONS24Structure of this Part25Funds excluded from the ambit of this PartCHAPTER 2PARTICIPANTS CHARGEABLE TO INCOME TAXDeduction of tax from interest distributions: general26Deduction of tax where interest distributions madeThe reputable intermediary condition27The reputable intermediary condition28The reputable intermediary condition: further provisions29Consequences of reasonable but incorrect beliefThe residence condition30The residence condition31Residence declarations32References to beneficiaries in regulations 30 and 3133Interest distributions: the position of the legal owner33AThe offshore marketing conditionThe non-liability condition34The non-liability condition35Qualifying certificates36The contents condition37The supplier condition38The time limit condition39The continuing validity condition40The qualifying circumstances condition41The joint holding condition42Qualifying certificates valid for only part of jointly held accounts: introductory43Qualifying certificates valid for only part of jointly held accounts: the general rule44Qualifying certificates valid for only part of jointly held accounts: further provisions45Consequences of notice under regulation 39(6)46Qualifying certificate not in writingAnnual payments to non-residents46AAnnual Payments – duty to deduct income tax46BConsequences of reasonable but incorrect beliefCHAPTER 3PARTICIPANTS CHARGEABLE TO CORPORATION TAXInterest distributions47The obligation to deduct taxDividend distributions48General48AIncome treated as an annual payment treated as foreign income48BTax treated as deducted from a dividend distribution49Calculation of unfranked part of dividend distribution50References to gross income51Participants chargeable to corporation tax: holdings in qualified investor schemes and long-term asset funds where scheme does not meet the genuine diversity of ownership condition52Repayments of tax52ACompanies carrying on general insurance business: treatment of certain amounts of tax as foreign tax52BDiversely owned AIFs and financial traders: treatment of shares and units52CFinancial traders: amounts to be brought into account in respect of shares or units held in diversely owned AIFs52DShares and units not within regulation 52C52EMeaning of financial traderCHAPTER 4CHARGE TO TAX ON SUBSTANTIAL QIS HOLDINGS IN QUALIFIED INVESTOR SCHEMESGeneral53Charge to tax under this Chapter54Meaning of “substantial QIS holding”55Amount charged to tax under this Chapter56Measuring dates and meaning of “chargeable measuring date”57How tax is charged under this Chapter: income tax58How tax is charged under this Chapter: corporation tax59Further provisionsThe first measuring date60The general rule61Cases affected by the coming into force of these Regulations62Cases involving the launch of qualified investor schemes63Cases where a participant's holding becomes substantial64Definition of the “first measuring date”65Calculation to be made on the first measuring dateDisposals of holdings66Reorganisations etc.67Disposal of part of a substantial QIS holding68Disposal of the whole of a substantial QIS holding69No gain/no loss disposalsPART 4APROPERTY AIFSCHAPTER 1PRELIMINARY PROVISIONS69AProperty AIFs69BStructure of this Part69CKey conceptsCHAPTER 2ENTRY INTO AND MEMBERSHIP OF THE PROPERTY AIF REGIMEConditions of membership of the Property AIF regime69DConditions for this Part to apply to company69DAConditions for this Part to apply to a company where the company is also a qualified investor schemeThe property investment business condition69EThe property investment business condition69FMeaning of “property investment business”69GProperty investment business: further provisions69HMeaning of “property rental business”69IMeaning of “intermediate holding vehicle”The genuine diversity of ownership condition69JThe genuine diversity of ownership conditionThe corporate ownership condition69KThe corporate ownership condition69LThe corporate ownership condition: further provisionsThe loan creditor condition69MThe loan creditor conditionThe balance of business conditions69NThe balance of business conditionsThe notification condition69OThe notification condition69PForm and timing of notice under regulation 69O69QContents of notice under regulation 69OProcedural matters relating to the giving of notice for this Part to apply69RNotice: further provisions: quashing notices69SProcedure relating to quashing notices69TAppeal against quashing noticeClearance applications69UClearance in relation to the genuine diversity of ownership conditionConsequences of entry69VEffects of entry69WDurationCHAPTER 3THE TAX TREATMENT OF PROPERTY AIFSCategories of business69XRing-fencing of tax-exempt businessChargeability to tax69YChargeability to corporation tax69ZMeaning of “net income”69Z1Calculation of net income of F (tax-exempt)69Z2Components of income arising to F (residual)69Z3Calculation of net income of F (residual)Breaches of conditions69Z4Breach of the genuine diversity of ownership condition69Z5Breach of the corporate ownership condition69Z6Breach of the loan creditor condition69Z7Breach of balance of business conditions69Z8Multiple breaches of separate conditionsFurther provisions69Z9Profit/financing costs in the case of a Property AIF that is a qualified investor scheme69Z10Cancellation of tax advantage69Z11Appeal against notice under regulation 69Z1069Z12Distribution to holder of excessive rights: charge to tax69Z13Meaning of “holder of excessive rights”CHAPTER 4DISTRIBUTIONS MADE BY PROPERTY AIFS69Z14Allocation of income69Z15Property income distributions69Z16PAIF distributions (interest)69Z17PAIF distributions (dividends)CHAPTER 5THE TREATMENT OF PARTICIPANTS IN PROPERTY AIFSTreatment of distributions: liability to tax of participants69Z18Property income distributions: liability to tax of participants69Z19PAIF distributions (interest): liability to tax of participants69Z20Property distributions (dividends): liability to tax of participants69Z21Distributions made after cessationDeduction of tax from distributions69Z22Deduction of tax from property income distributions69Z23Deduction of tax from PAIF distributions (interest)69Z24Distribution payments to be made without deduction of tax69Z24AManufactured dividends representing property income distributions69Z24BManufactured dividends representing PAIF distributions (interest)69Z24CManufactured dividends – PAIF distributions (dividends)69Z24DInterpretationConversions and exchanges69Z24EConversion to property AIF69Z24FExchange of units69Z24GFurther requirement69Z24HApplication of section 137 of TCGACHAPTER 6COMPLIANCE IN RELATION TO THE PROPERTY AIF REGIMECompany tax return69Z25Documents to be included with company tax returnBreaches of conditions in Chapter 269Z26Information to be provided by company to which this Part appliesHolders of excessive rights69Z27Information relating to holders of excessive rightsInformation about possible breaches of conditions of membership of Property AIF regime69Z28Information to be provided to officers of Revenue and CustomsAccounting for tax deducted from property income distributions69Z29Payments in an accounting period69Z30Collection and payment of tax69Z31Assessments where relevant distribution included in return69Z32Assessments in other cases69Z33Application of Income Tax Acts provisions about time limits for assessments69Z34Certificates of deduction of tax69Z35Company’s duty to deliver amended returnCHAPTER 7LEAVING THE PROPERTY AIF REGIME69Z36Termination by notice: company69Z37Termination by notice: Commissioners69Z38Appeal against termination notice69Z39Company ceasing to be authorised etc.69Z40Mergers69Z41Effects of cessationPART 4BTAX ELECTED FUNDSCHAPTER 1PRELIMINARY PROVISIONS69Z42Tax Elected Funds69Z43Structure of this Part69Z44InterpretationCHAPTER 2ENTRY INTO AND MEMBERSHIP OF THE TAX ELECTED FUNDS REGIMEConditions of membership of the Tax Elected Funds regime69Z45Conditions for this Part to apply to fundThe TEF conditions69Z46The property condition69Z47The loan creditor condition69Z48The scheme documentation conditionApplication for this Part to apply69Z49Application process69Z50Form and timing of application under regulation 69Z4969Z51Contents of application under regulation 69Z49Procedural matters relating to the making of applications for this Part to apply69Z52Refusing an application: refusal notice69Z53Appeal against refusal noticeConsequences of entry69Z54Effects of entry69Z55DurationCHAPTER 3THE TAX TREATMENT OF TAX ELECTED FUNDS69Z56Components of income69Z57Treatment of property investment income69Z58Treatment of distributionsCHAPTER 4DISTRIBUTIONS MADE BY TAX ELECTED FUNDS69Z59Allocation of income69Z60TEF distributions (dividends)69Z61TEF distributions (non-dividend)CHAPTER 5THE TREATMENT OF PARTICIPANTS IN TAX ELECTED FUNDSTEF distribution (dividend)69Z62Participants chargeable to corporation taxTEF distributions (non-dividend)69Z63Obligation to deduct tax from TEF distributions (non-dividend)69Z64Modification of section 490 of CTA 2009CHAPTER 6COMPLIANCE IN RELATION TO THE TAX ELECTED FUNDS REGIMEBreaches of TEF conditions69Z65Breach of conditions: general69Z66Breach of the property condition, genuine diversity of ownership condition or scheme documentation condition69Z67Breach of the loan creditor condition69Z68Multiple breaches of separate conditionsInformation about possible breaches of the TEF conditions69Z69Information to be provided to officers of Revenue and CustomsCHAPTER 7LEAVING THE TAX ELECTED FUNDS REGIME69Z70Termination by election: authorised investment fund69Z71Termination by notice: Commissioners69Z72Appeal against termination notice69Z73MergersPART 5COMPLIANCEInformation relating to distributions70Application of section 234A of ICTAInterest distributions and TEF distributions (non-dividend) 71Notification of interest distributions and TEF distributions (non-dividend) made without deduction of tax72Information about interest distributions and TEF distributions (non-dividend) made without deduction of tax73Inspection of records74Use of informationResidence declarations75Inspection of residence declarationsPART 6FURTHER PROVISIONS RELATING TO AUTHORISED INVESTMENT FUNDSCHAPTER 1GENERAL76Ownership of shares of different denominations in open-ended investment companies77Non-discrimination in respect of different classes of sharesCHAPTER 2AMALGAMATION OF AN AUTHORISED UNIT TRUST WITH, AND CONVERSION OF AN AUTHORISED UNIT TRUST TO, AN OPEN-ENDED INVESTMENT COMPANY78Circumstances in which this Chapter applies79Ending of accounting period of the target trust80Carrying forward of excess management expenses81Distributions by authorised unit trust after the end of its pre-transfer accounting period82Continuing validity of residence declarations83Powers of the acquiring company84Assessments made on discovery85Prevention of double reliefPART 6AFUNDS INVESTING IN NON-REPORTING OFFSHORE FUNDSCHAPTER 1Preliminary Provisions85AFINROFs85BStructure of this Part85CInterpretation85DThe investment condition85EInterests in funds treated as not being interests in non-reporting funds85FElective FINROFsCHAPTER 2Entry into Funds Investing in Non-Reporting Offshore Fund (“FINROF”) regime85GEntry into FINROF regime: the basic rule85HThe requirement to notify where regulation 85D is satisfied85IThe requirement to notify participants when a fund enters the FINROF regime85JInadvertent fulfilment of investment condition85KAppeal against refusal to provide written notice85LDisposal of an interest in an authorised investment fund prior to its becoming a FINROFCHAPTER 3Tax treatment of FINROFs and of participants in FINROFsThe charge to tax85MThe charge to tax: general provisions85NThe charge to tax: further provisions85OApplication of certain provisions of TCGA 199285PApplication of section 10A of TCGA 1992CHAPTER 4Exceptions, etc from the charge to tax85QExceptions from the charge to tax85RTrading stock etc.85SLong-term insurance funds of insurance companies85TCharitable companies and charitable trustsCHAPTER 5Disposal of units in FINROFs85UApplication of this Chapter85VDisposal of an asset: the basic rule85WProvisions applicable on death85XApplication of section 135 of TCGA 199285YApplication of section 136 of TCGA 1992CHAPTER 6Income gains and computation of income gains85ZGeneral provisions85Z1The basic gain and its computation85Z2Earlier disposal to which the no gain/no loss basis applies85Z3Modifications of TCGA 199285Z4LossesCHAPTER 7Deduction of income gains in computing chargeable gains85Z5Scope of this Chapter85Z6Treatment of the TCGA disposal: general rules85Z7Modification of section 162 TCGA 199285Z8Application of section 128 of TCGA 1992CHAPTER 8Leaving the FINROF regime85Z9Leaving the FINROF regime85Z10Requirement to notify participants when a fund leaves the FINROF regime85Z11Participant’s power to elect for deemed disposalPART 7CONSEQUENTIAL AMENDMENTS AND MODIFICATIONS OF ENACTMENTSCHAPTER 1AMENDMENTS OF REFERENCES TO REPEALED ENACTMENTS86Introduction87Amendments of TMA 197088Amendment of ICTA89Amendment of TCGA 199290Amendment of FA 199691Amendments of ITTOIA 200592Amendment of the Finance Act 2005CHAPTER 2MODIFICATIONS OF THE TAX ACTS93Introduction93AModifications of TMA 197094Modifications of ICTA95Modifications of FA 199696Modifications of ITTOIA 200596AModification of CTA 2009CHAPTER 3MODIFICATIONS OF TCGA 1992Preliminary97IntroductionGeneral98Application of TCGA 1992: generalGeneral modifications of TCGA 199299General modifications: introduction100General modification: authorised unit trust101General modification: manager of authorised unit trust102General modification: unit in authorised unit trust103General modification: accumulation units in authorised unit trusts104General modification: holder of unit in authorised unit trustSpecific modifications of TCGA 1992105Modification of section 99 of TCGA 1992106Insertion of section 99AA of TCGA 1992107Modification of section 170 of TCGA 1992108Modifications of section 272 of TCGA 1992109Modifications of section 288 of TCGA 1992110Modification of Schedule A1 to TCGA 1992PART 8FINAL PROVISIONS111Instruments revokedSCHEDULEAbbreviations and Defined ExpressionsPART 1Abbreviations of ActsPART 2Index of expressions defined or otherwise explained in these Regulations

2006 No. 964

INCOME TAXCORPORATION TAXCAPITAL GAINS TAX

The Authorised Investment Funds (Tax) Regulations 2006

Made29th March 2006

Coming into force1st 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: