Corporation Tax Act 2009

Holdings in OEICs, unit trusts and offshore funds treated as creditor relationship rights U.K.

490 Holdings in OEICs, unit trusts and offshore funds treated as creditor relationship rights U.K.

(1) This section applies if—

(a) at any time in an accounting period of a company it holds—

(i) any shares in an open-ended investment company,

(ii) any rights under a unit trust scheme, or

(iii) [F1 an interest] in an offshore fund, and

(b) there is a time in the period when that company, scheme or fund fails to meet the qualifying investments test (see section 493).

[F2 (2) The Corporation Tax Acts have effect for the accounting period in accordance with subsection (3) as if—

(a) the relevant holding were rights under a creditor relationship of the company, and

(b) any distribution in respect of the relevant holding were not a distribution (and accordingly is within Part 5).]

(3) The credits and debits to be brought into account for the purposes of Part 5 in respect of the company's relevant holdings are to be determined on the basis of fair value accounting.

F3 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) In this section and sections 491 and 492 “relevant holding” means a holding within subsection (1)(a).

(7) [F4 But the following are not treated as such a holding—

(a) arrangements] that are investment bond arrangements for the purposes of Chapter 6 of this Part or are within section 48A of FA 2005 (alternative finance arrangements: alternative finance investment bond: introduction) [F5 , and

(b) a holding in an offshore fund (including a unit trust which is also an offshore fund) if the income arising to the fund is treated as the income of the company]

(8) See section 18(2)(c)(i) of F(No.2)A 2005 (section 17(3): specific powers) for the power to modify “relevant holding” for the purposes of this section and section 492 by regulations under section 17(3) of that Act (regulations about authorised unit trusts and OEICS).

Textual Amendments

F1 Words in s. 490(1)(a)(iii) substituted (with effect in accordance with art. 1(2)(3) Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 131(3)

F2 S. 490(2) substituted (with effect in accordance with s. 27(7)-(9) of the amending Act) by Finance Act 2014 (c. 26), s. 27(3)

F3 S. 490(4)(5) omitted (with effect in accordance with s. 27(7)-(9) of the amending Act) by virtue of Finance Act 2014 (c. 26), s. 27(4)

F4 Words in s. 490(7) substituted (27.5.2011) (with effect in accordance with reg. 1(2) of the amending S.I.) by The Offshore Funds (Tax) (Amendment) Regulations 2011 (S.I. 2011/1211), regs. 1(1), 45(a)

F5 Words in s. 490(7) substituted (27.5.2011) (with effect in accordance with reg. 1(2) of the amending S.I.) by The Offshore Funds (Tax) (Amendment) Regulations 2011 (S.I. 2011/1211), regs. 1(1), 45(b)

Modifications etc. (not altering text)

C1 S. 490 applied (with modifications) by S.I. 2006/964, reg. 69Z64 (as inserted (1.9.2009) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2009 (S.I. 2009/2036), regs. 1, 24)

C2 S. 490 excluded by S.I. 2013/2819, reg. 29A (as inserted (6.4.2014) by The Unauthorised Unit Trusts (Tax) (Amendment) Regulations 2014 (S.I. 2014/585), regs. 1, 5)

491 Holding coming within section 490: opening valuations U.K.

(1) This section applies if—

(a) a relevant holding is held by a company both—

(i) at the end of one accounting period (“the first period”), and

(ii) at the beginning of the next (“the second period”), and

(b) section 490 applies to the holding for the second period but not the first period.

(2) For the purposes of section 490(3), the opening value of the holding as at the beginning of the second period is taken to be equal to its market value for the purposes of TCGA 1992 immediately before the end of the first period (see section 272 of that Act).

[F6 492 Holding coming within section 490: calculation to undo avoidance U.K.

(1) Subsection (2) applies if—

(a) section 490 applies for an accounting period of a company to a relevant holding held by the company,

(b) a relevant fund enters into any arrangements, or arrangements are entered into that in whole or part relate to a relevant fund, and

(c) the main purpose or one of the main purposes of the arrangements is to obtain a tax advantage for a person.

(2) The company must make adjustments to counteract any tax advantage connected in any way with the relevant holding that would (ignoring this section) be obtained by the company, or any other person, directly or indirectly in consequence of the arrangements or their being entered into.

(3) The arrangements may be ones entered into at a time when the company does not hold the relevant holding; and any person referred to in subsection (1)(c) need not be identified when the arrangements are entered into.

(4) The adjustments required by subsection (2) are such as are just and reasonable.

(5) In this section—

• “arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions, and

• “relevant fund” means—

  (a)

  the open-ended investment company, unit trust scheme or offshore fund in which the relevant holding is held, or

  (b)

  an open-ended investment company, unit trust scheme or offshore fund in which a relevant fund has a holding.]

Textual Amendments

F6 S. 492 substituted (with effect in accordance with s. 27(7)-(9) of the amending Act) by Finance Act 2014 (c. 26), s. 27(5)