1925.This Chapter rewrites sections 468, 468A and 469A of ICTA and provides rules about authorised investment funds.
1926.The term “authorised investment funds” is not defined in this Chapter because it is not used in the body of the sections. But it is defined in other legislation and is commonly understood to refer to both open-ended investment companies (OEICs) and authorised unit trusts (AUTs). The Chapter also provides rules about court investment funds, which are treated as AUTs.
1927.This section provides an overview of what is in the Chapter. It is new.
1928.This section sets out the definition of an “open-ended investment company” (an OEIC). It is based on section 468A(2) of ICTA.
1929.This section, which is based on section 468A(1) of ICTA, provides that the rate of corporation tax applicable to an OEIC is the income tax basic rate (see section 6 of ITA).
1930.This section sets out the definition of “umbrella company” and how such a company is treated. It is based on section 468A(3) and (4) of ICTA.
1931.An umbrella company is an OEIC whose investments are pooled separately in sub-funds which may have different investment objectives. As in section 235 of FISMA, this practice is referred to in this section in terms of separate pooling and separate parts. References in the section to a part of an umbrella company are to a separate pool (subsection (2)).
1932.Each separate part of an umbrella company is treated as a separate OEIC while the umbrella company as a whole is not treated as an OEIC. This mirrors the provision made for umbrella schemes by section 619.
1933.This section defines these terms for the purposes of the Chapter. It is based on section 468(6) of ICTA.
1934.This section provides that the Tax Acts have effect as if the trustees of an AUT were a UK resident company, and as if the rights of the unit holders were shares in the company. It is based on section 468(1) and (3) of ICTA.
1935.Detailed rules for the taxation of both an AUT as an institution, and unit holders as investors, are set out in the Authorised Investment Funds (Tax) Regulations 2006 (SI 2006/964).
1936.Subsection (3) makes it clear that the treatment in subsection (1)(b) does not affect the rules which enable an AUT to make distributions which are interest distributions to unit holders. The term “interest distribution” is currently defined in regulation 18(3) of SI 2006/964.
1937.This section states that a special rate of corporation tax is applicable to AUTs. It is based on section 468(1A) of ICTA.
1938.The applicable rate is the income tax basic rate (see section 6 of ITA).
1939.This section sets out the definition of an “umbrella scheme” and how such a scheme is treated. It is based on section 468(7), (8) and (9) of ICTA.
1940.An umbrella scheme is a fund which is divided into sub-funds which may have different investment objectives. As in section 235 of FISMA, this practice is referred to in this section in terms of separate pooling and separate parts. References in the section to a part of an umbrella scheme are to the pooling arrangements that relate to a separate pool.
1941.Each separate part of an umbrella scheme is treated as a separate AUT while the umbrella scheme as a whole is not treated as an AUT. This mirrors the provision made for umbrella companies by section 615.
1942.This section sets out the treatment of court investment funds. It is based on section 469A of ICTA.
1943.In section 469A of ICTA the fund is described as a court common investment fund but for capital gains tax purposes (see section 100(3) of TCGA) the same kind of account is named a court investment fund. We have changed the term to be consistent with the simpler and clearer description in TCGA.
1944.A court investment fund is defined in subsection (1) as a fund set up under section 42 of the Administration of Justice Act 1982.
1945.The effect of the section is that the Tax Acts apply to a court investment fund as if it were an AUT (with the investment manager of the fund in the role of trustee) and as if the persons with qualifying interests in the fund (see the table insubsection (3)) were unit holders in the AUT.