Section 289: Undertakings for Collective Investment in Transferable Securities and Alternative Investment Funds
Summary
1.This section extends the application of section 363A Taxation (International and Other Provisions) Act 2010 (TIOPA) to Alternative Investment Funds (AIFs).
Details of the Section
2.Subsection 2 substitutes subsections (1) and (2) of section 363A.
3.New subsection (1) removes the requirement for a fund within the scope of section 363A to come within the definition of an offshore fund at section 355 TIOPA, and amends it so that it applies to Undertakings For Collective Investment In Transferable Securities (UCITS) and to AIFs, provided that they are not ‘excluded entities’.
4.New subsection (2) no longer requires that a body corporate is treated as resident in a State for the purposes of any tax imposed on income and applies the provisions to entities within the extended scope of section 363A.
5.New subsection (2A) provides a definition of the term ‘excluded entity’, and lists entity types within that definition.
6.New subsection (2B) provides a power for The Treasury to add to, subtract from or vary the list at subsection (2A).
7.Subsection (3) replaces the reference in subsection (3) of section 363A to “offshore fund” with “UCITS or AIF”, and subsection (4) defines those and other terms used in the section.
8.Subsection 5 makes various consequential amendments to TIOPA.
9.Subsection 6 provides for the changes, which are wholly relieving, to come into force from 5 December 2013. Entities within the extended scope of amended section 363A will therefore be treated as not resident (as provided by that section) from that date.
Background Note
10.Currently, section 363A treats offshore funds (as defined at section 355 TIOPA) that are authorised under article 5 of the UCITS Directive (Directive 2009/65/EC of the European Parliament and of the Council), as not being resident in the United Kingdom if they are resident in another Member State for the purposes of any tax imposed under the law of that State on income.
11.Section 363A was introduced in Finance Act 2011, with effect from 19 July 2011, to maintain the competitiveness of the UK fund management industry following the introduction of the UCITS IV Directive, which provided a “management company passport”. The effect of section 363A is that managing a fund within its scope from the UK will not cause the fund to be treated as resident in the UK as a result of central management and control being deemed to be located here.
12.The amendments made by this section follow the announcement of the UK’s Investment Management Strategy (IMS) at Budget 2013. The IMS included a range of measures to improve the competitive position of the UK investment management industry.
13.A consultation document entitled ‘Residence of Offshore Funds - extending the scope of Section 363A Taxation (International and Other Provisions) Act 2010’ was published on 22 July 2013 setting out the Government’s proposals. A draft clause was published as part of the draft Finance Bill at Autumn Statement 2013. This section takes account of concerns expressed in response to the draft clause, to clarify its scope.