The Investment Trust (Approved Company) (Tax) Regulations 2011

PART 4 Investment trust having an interest in offshore non-reporting funds and index tracking funds

Interests in offshore non-reporting funds: general

42.—(1) Regulation 43 applies if—

(a) an investment trust disposes of an asset which is an interest in a non-reporting fund (“the asset”), and

(b) the conditions in paragraph (2) are satisfied for the period starting with the date on which the investment trust acquired the asset and ending with the day of the disposal.

(2) The conditions are that—

(a) the investment trust has access to the accounts of the non-reporting fund,

(b) the investment trust had sufficient information about the non-reporting fund referred to in paragraph (1)(a) to enable it to prepare computations of reportable income for the non-reporting fund for every accounting period which, if the non-reporting fund were a reporting fund, would be a reporting period ending within the period mentioned in paragraph (1)(b),

(c) the investment trust has prepared such computations, and

(d) any excess of the investment trust’s share of the reportable income of the non-reporting fund over the investment trust’s share of the distributions made by the non-reporting fund is included in the amount available for distribution by the investment trust for each accounting period of the investment trust which falls within the period mentioned in paragraph (1)(b).

(3) An investment trust has an interest in a non-reporting fund if and to the extent that it has an interest in such a fund for the purposes of the Offshore Funds Regulations.

(4) For the purposes of the computations mentioned in paragraph (2)(b), regulation 80 (treatment of investment transactions carried out by diversely owned funds) of the Offshore Funds Regulations applies if (and only if) the non-reporting fund is a UCITS fund.

(5) In this regulation, “UCITS fund” has the same meaning as in regulation 12 (general interpretation) of the Offshore Funds Regulations(1) and “reporting period” has the same meaning as in regulation 91 (meaning of “reporting period”) of those Regulations.

Treatment of disposal of interest in non-reporting fund

43.  No tax shall be charged on the investment trust under regulation 17 (the charge to tax) of the Offshore Funds Regulations on the disposal by the investment trust of an asset which is an interest in a non-reporting fund at the time of the disposal.

Treatment of interest in non-reporting fund: cases where conditions in regulation 42(2) would not be satisfied

44.—(1) This regulation applies in relation to an asset of an investment trust (“the asset”)—

(a) which is an interest in a non-reporting fund, but

(b) in relation to which the conditions in regulation 42(2) would not (apart from this regulation) be satisfied for the whole of the period specified in regulation 42(1)(b) in relation to the asset.

(2) Paragraph (4) applies if the investment trust, in relation to the asset, reasonably expects to satisfy the conditions in regulation 42(2) for the period beginning with a date to be determined in accordance with paragraph (3) (“the deemed start date”) and ending with the date of the disposal of the asset.

(3) The deemed start date is a date to be determined by the investment trust which must not be earlier than 1st January 2012.

(4) The investment trust is treated for all purposes (including for the purposes of determining the beginning of the period mentioned in regulation 42(1)(b)) as if it had, on the deemed start date, disposed of the asset (and not satisfied the conditions in regulation 42(2)) and immediately reacquired the asset for a consideration equal to its market value on the deemed start date.

(5) The investment trust must notify the Commissioners of the deemed start date by making an appropriate entry in its company tax return for the accounting period in which the deemed start date falls.

Index tracking funds

45.—(1) This regulation applies if—

(a) an investment trust has an interest in a non-reporting fund,

(b) the conditions in paragraph (2) are met throughout the relevant period.

(2) The conditions are that—

(a) in accordance with the instrument constituting the investment trust, the aim of the investment trust’s 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 investment trust replicate as closely as practicable the returns of the investment 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 investment trust.

(4) Regulation 17 of the Offshore Funds Regulations does not apply in respect of a disposal by the investment trust of the interest in the non-reporting fund.

(5) In this regulation the “relevant period” means the period—

(a) starting with the day on which the investment trust acquires the interest in the non-reporting fund (or any part of it), and

(b) ending with the day of the disposal of the interest.

(6) In this regulation—

(a) a “competent authority for 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)(2), and

(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))(3).

Consequential amendment

46.  For paragraph (6) of regulation 18 (the charge to tax: further provisions) of the Offshore Funds Regulations(4), substitute—

“(6) Nothing in regulation 17 of these Regulations applies to—

(a) an authorised investment fund to which regulation 14ZB, 14ZD(1) or Part 6A of the Authorised Investment Fund (Tax) Regulations 2006 applies, or

(b) an investment trust company to which regulation 43 or 45 of the Investment Trust (Approved Company) (Tax) Regulations 2011 apply.”.

(1)

Regulation 12 was amended by S.I. 2011/1121.

(2)

OJ L 302, 17.11.2009, p.32.

(3)

OJ L 145, 30.4.2004, p.1.

(4)

Regulation 18 was amended by S.I. 2010/294, 2011/244 and 2011/2192.