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Finance Act 2012

Background Note

5.The Government has announced its intention to legislate to enable the UK regulator to authorise, under the UCITS IV directive(1), tax transparent collective investment schemes, to be constituted by contractual arrangements. The purpose of this section is to provide powers for the appropriate tax treatment of gains made by UK investors on assets held in specified new types of collective investment scheme.

6.As the legislation to enable authorisation of specific types of tax-transparent collective investment scheme is yet to be enacted, this section provides a power to specify the tax treatment of participants in collective investment schemes. It is anticipated that the power will be used on the enactment of legislation to authorise new schemes.

7.Specific anticipated uses of the power will be to:

a.

provide that, for the purposes of tax on chargeable gains, assets held by the investors within certain tax transparent collective investment schemes will not be chargeable assets and that, instead, the investor’s interest in the scheme will be treated as if it were a chargeable asset,

b.

provide that, for assets held within a transparent scheme where interests in the scheme  are treated as being the assets held by the investor then section 212 TCGA will apply to interests within the long term fund of an insurance company,

c.

provide a relief for insurance companies which transfer assets to such transparent schemes that will ensure that no chargeable gain arises at the point of transfer, together with a provision to prevent abuse of that relief,

d.

enable the provisions in TCGA to be adapted for use with the merger and reconstruction of new and existing types of collective investment scheme so that the provisions will work when applied to interests in tax-transparent schemes and be simplified in application to existing schemes and changes may be made to what constitutes a disposal.

1

Directive 2009/65/EC of the European Parliament and of The Council.

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