.png)
.png)
HMRC have published for consultation draft guidance explaining new regulations contained in SI 2009/2036 that take effect from 1 September.
The guidance is divided into three distinct parts and includes the following:
General genuine diversity of ownership condition (GDO)
The GDO aims to ensure that authorised investment funds (AIFs) are genuine pooled investment schemes rather than arrangements designed to take advantage of the tax benefits of an AIF that may in reality be closely held investments for the benefit of a few individuals.
The new general GDO has been introduced so that a single condition can apply to most AIFs that rely on the GDO being met.
The only variation to the new provisions is that the rules that allow specific types of unit trust schemes known as feeder funds to be taken into account in applying the test to the GDO has been restricted to property AIFs only.
Trading or investment
New provisions allow defined financial transactions carried out by AIFs that meet certain conditions from being characterised as trading transactions for tax purposes.
This rule gives diversely owned AIFs certainty that gains on the realisation of certain types of investments, which would not be chargeable gains, cannot be re-characterised as profits arising from a trade which would then be taxable as income.
Tax elected funds (TEFs)
The intention of the new TEF regime is to move the point of taxation from the TEF to the investor so that the investor is taxed as though they had invested in the underlying assets directly.
This is achieved by requiring the TEF to make two types of distribution, a dividend distribution and a non-dividend distribution.
In general all dividend income received by the TEF will be distributed as a dividend distribution and all other income will be distributed as a non-dividend distribution.
Investors are then taxed as though they have received a dividend, including the non-payable dividend tax credit and a payment of yearly interest and will allow the TEF to be an appropriate investment fund for a variety of investors, including those not subject to tax in the UK.
Comments should be made by 16 October via email. Click here to send remarks regarding the GDO and the TEF regime, and here for trading or investment rules.
