The Collective Investment Schemes and Offshore Funds (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2017

103DApplication of Act to tax transparent funds

1

For the purposes of this section—

• “tax transparent fund” means—

  1. a

     an authorised contractual scheme which is a co-ownership scheme, or

  2. b

     an offshore fund that is a transparent fund within the meaning given by regulation 11 of the Offshore Funds (Tax) Regulations 20097, and

• “fund property”, in relation to a tax transparent fund, means the property subject to the fund.

2

For the purposes of this Act—

• “authorised contractual scheme” has the meaning given by section 237(3) of the Financial Services and Markets Act 20008, and

• “co-ownership scheme” has the meaning given by section 235A of that Act9.

3

A unit in a tax transparent fund is treated as an asset for the purposes of this Act, and, accordingly, a participant’s interest in the fund property is disregarded for those purposes.

4

In computing the gain accruing on a disposal by a participant of units in a tax transparent fund, an amount which—

a

represents income from the fund property, and

b

is taken into account as a receipt or other credit of the participant in calculating an amount chargeable to income tax,

is treated as expenditure falling within section 38(1)(b).

5

In computing the gain accruing on a disposal by a participant of units in a tax transparent fund—

a

the sums that would otherwise be allowable under section 38(1) as a deduction from the consideration in the computation of the gain are reduced (but not below nil) by the amounts within subsection (7), and

b

if those amounts exceed the sums that would otherwise be so allowable, the consideration is treated as increased by the amount of the excess.

6

So far as an amount within subsection (7) is dealt with under subsection (5)(a), it is not also dealt with under section 39.

7

An amount is within this subsection if it is—

a

any amount arising to the participant from the fund property which is taken into account as an expense or other debit of the participant in calculating an amount chargeable to income tax, or

b

anything paid or transferred to the participant, or anything else of value received by the participant, which is referable to the holding of the units (whenever paid, transferred or received) unless section 22 applies to whatever is paid, transferred or received.

8

In the case of any asset transferred as mentioned in subsection (7)(b), the value of the asset on the date of the transfer is taken to be its market value on that date.

9

If a participant has incurred expenditure in relation to any fund property in respect of which a capital allowance or renewals allowance (as defined by section 41(4) or (5)) has been or may be made, that expenditure is excluded from the sums allowable as a deduction in computing the amount of a loss accruing to the participant on a disposal of the units in the fund.

10

In this section—

• “participant”—

  1. a

     in relation to a collective investment scheme, is to be read in accordance with section 235 of the Financial Services and Markets Act 2000, and

  2. b

     in relation to an offshore fund (which is not a collective investment scheme), has the meaning given in section 362(1) of TIOPA 2010, and

• “units”, in relation to a tax transparent fund, means the rights or interests (however described) of the participants in the fund.

103DATax transparent funds: share pooling etc

A unit in a transparent fund is to be regarded as a security for the purposes of sections 104, 105, 107, 110 and 114 (share pooling, identification of securities and indexation).