4 Insertion of new regulation 14ZD (index tracking funds)
In Part 2, after regulation 14ZC insert—

“Treatments applying to authorised investment funds with specific investment purposes

14ZD Index tracking funds
1 This regulation applies if—
(a) an authorised investment fund has an interest in a non-reporting fund, and
(b) the conditions in paragraph (2) are met throughout the relevant period.
2 The conditions are that—
(a) in accordance with either the authorised investment fund’s prospectus or the instrument constituting the authorised investment fund, the aim of the authorised investment fund’s investment policy is to replicate the performance of a qualifying index,
(b) the main purpose of the investment in the non-reporting fund is to represent the composition of the qualifying index, and
(c) the capital and income returns of the authorised investment fund replicate as closely as practicable the returns of the investments comprised in the qualifying index.
3 For the purposes of paragraph (2) an index is a “qualifying index” if—
(a) it is based solely on the value of securities listed on a recognised stock exchange or admitted to trading on a regulated market,
(b) either a competent authority for the United Kingdom or an authority responsible for regulating offshore funds recognises the index on the basis that—
(i) its composition is sufficiently diverse,
(ii) it represents an adequate benchmark for the market to which it refers, and
(iii) it is published in such a way that it is widely available, and
(c) it is calculated and published by a body which is managed independently from the management of the authorised investment fund.
4 Regulation 17 of the Offshore Funds Regulations does not apply in respect of a disposal of the interest in the non-reporting fund by the authorised investment fund.
“Offshore Funds Regulations” are defined in regulation 8 of the Authorised Investment Funds (Tax) Regulations 2006, that definition was inserted by S.I. 2011/244.
5 In this regulation “the relevant period” means the period—
(a) starting on the day the authorised investment fund acquires the interest in the non-reporting fund (or any part of it), and
(b) ending on the day of the disposal of the interest.
6 In this regulation—
(a) a “competent authority in the United Kingdom” means the authority which is a competent authority for the United Kingdom for the purposes of Directive 2009/65/EC of the European Parliament and of the Council on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), and
OJ No L 302, 17.11.2009, p32.
(b) “regulated market” has the same meaning as in Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments (see article 4.1(14)).
OJ No L 145, 30.4.2004, p1.”

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Regulation 14ZC was inserted by S.I. 2011/244.