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Finance Bill


Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 3 — Authorised investment funds etc

15

 

the financial year concerned (and sections 13, 13AA and 13AB shall not

apply).

(2)   

In this section “open-ended investment company” means a company

incorporated in the United Kingdom to which section 236 of the

Financial Services and Markets Act 2000 (c. 8) applies.

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(3)   

Each of the parts of an umbrella company shall be regarded for the

purposes of this section as an open-ended investment company and the

umbrella company as a whole shall not be so regarded (and shall not,

unless an enactment expressly provides otherwise, be regarded as a

company for any other purpose of the Tax Acts).

10

(4)   

In subsection (3) “umbrella company” means an open-ended

investment company—

(a)   

in respect of which the instrument of incorporation provides

arrangements for separate pooling of the contributions of the

shareholders and the profits or income out of which payments

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are to be made to them, and

(b)   

the shareholders of which are entitled to exchange rights in one

pool for rights in another,

and a reference to part of an umbrella company is a reference to a

separate pool.”

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17      

Authorised unit trusts and open-ended investment companies

(1)   

The following provisions shall cease to have effect—

(a)   

sections 468H to 468Q of ICTA (authorised unit trusts),

(b)   

paragraphs 2A and 2B of Schedule 10 to FA 1996 (authorised unit trusts

and open-ended investment companies: loan relationships),

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(c)   

paragraphs 32 and 33 of Schedule 26 to FA 2002 (collective investment

schemes: derivative contracts),

(d)   

section 373(4) and (6) of ITTOIA 2005 (open-ended investment

company: interest distributions), and

(e)   

section 376(4) and (6) of ITTOIA 2005 (authorised unit trust: interest

30

distributions).

(2)   

In this Chapter “authorised investment funds” means—

(a)   

authorised unit trust schemes, and

(b)   

open-ended investment companies.

(3)   

The Treasury may, by regulations—

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(a)   

make provision about the treatment of authorised investment funds for

the purposes of an enactment relating to taxation;

(b)   

provide for the modification of an enactment relating to taxation in its

application in relation to—

(i)   

authorised investment funds,

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(ii)   

shareholders or unit holders in authorised investment funds, or

(iii)   

transactions involving authorised investment funds;

(c)   

impose requirements on persons responsible for the management of an

authorised investment fund in relation to the provision of information,

the form of accounts, the keeping of records or other administrative

45

matters.

 
 

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 3 — Authorised investment funds etc

16

 

(4)   

For the purposes of this Chapter—

(a)   

“unit trust scheme” has the meaning given by section 237 of the

Financial Services and Markets Act 2000 (c. 8),

(b)   

a unit trust scheme is authorised in relation to an accounting period if

an order under section 243 of the Financial Services and Markets Act

5

2000 is in force in relation to that scheme during the whole or part of

that accounting period,

(c)   

“unit holder” means a person entitled to a share of the investments

subject to the trusts of a unit trust scheme,

(d)   

a reference to a shareholder or unit holder includes a person

10

beneficially entitled to shares or units (and a reference to owning units

or shares shall be construed accordingly),

(e)   

“open-ended investment company” means a company incorporated in

the United Kingdom to which section 236 of the Financial Services and

Markets Act 2000 applies,

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(f)   

“associate” has the meaning given by section 417 ICTA,

(g)   

“net asset value” means the value of the assets of the authorised

investment fund, after the deduction of specified liabilities,

(h)   

a reference to a distribution includes investing an amount on behalf of

a unit holder or shareholder in respect of his accumulation units or

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accumulation shares,

(i)   

“distribution accounts” means accounts showing—

(i)   

the total amount available for distribution to unit holders or

shareholders, and

(ii)   

how that amount is computed,

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(j)   

the “distribution date” for a distribution period in relation to an

authorised investment fund means—

(i)   

the date specified by or in accordance with the terms of the trust

or the instrument of incorporation of the company for any

distribution for that distribution period, or

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(ii)   

if no date is specified, the last day of that distribution period,

(k)   

“distribution period” in relation to an authorised investment fund

means a period by reference to which the total amount available for

distribution to unit holders or shareholders is ascertained,

(l)   

“umbrella company” has the meaning given by section 468A of ICTA,

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(m)   

“umbrella scheme” has the meaning given by section 468 of ICTA, and

(n)   

section 839 of ICTA (connected persons) applies.

18      

Section 17(3): specific powers

(1)   

Regulations under section 17(3)(a) or (b) may make provision about

distributions which may, in particular—

40

(a)   

require an authorised investment fund to comply with prescribed rules

for determining (whether by reference to a formula or otherwise) what

proportion of an amount shown in distribution accounts as available

for distribution is to be distributed by way of dividends and what

proportion is to be distributed by way of yearly interest;

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(b)   

permit persons responsible for the management of an authorised

investment fund to elect to distribute entirely by way of dividends;

(c)   

require distribution accounts to show the amount available for

distribution—

 
 

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 3 — Authorised investment funds etc

17

 

(i)   

by way of dividends;

(ii)   

by way of yearly interest;

(d)   

allow a distribution of yearly interest for a distribution period to be

deducted, in the prescribed manner, in computing the profits of the

authorised investment fund for the accounting period in which the last

5

day of that distribution period falls;

(e)   

make provision for determining the distribution date in relation to a

distribution period of an authorised investment fund;

(f)   

permit distributions to be made, in prescribed circumstances, to or for

the benefit of a person not ordinarily resident in the United Kingdom

10

without deducting tax;

(g)   

permit distributions to be made without deducting tax, in prescribed

circumstances, to a person ordinarily resident in the United Kingdom

who is unlikely to be liable to pay an amount by way of income tax for

the year of assessment in which the distribution is made;

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(h)   

include provision, in respect of a unit holder or shareholder who is

within the charge to corporation tax, about—

(i)   

the liability to corporation tax resulting from receipt of a

distribution, and

(ii)   

the method of computing that liability.

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(2)   

Regulations under section 17(3)(a) or (b) may, in particular—

(a)   

make special provision for loan relationships held by an authorised

investment fund;

(b)   

make special provision for derivative contracts held by an authorised

investment fund;

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(c)   

modify the meaning of “relevant holding” for the purposes of—

(i)   

paragraph 4 of Schedule 10 to FA 1996 (loan relationships), and

(ii)   

paragraph 36 of Schedule 26 to FA 2002 (derivative contracts);

(d)   

make special provision in relation to the treatment of umbrella

companies and umbrella schemes (or shareholders or unit holders in

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umbrella companies or umbrella schemes);

(e)   

prohibit action which favours a class of unit holders or shareholders.

(3)   

Regulations under section 17(3)(a) or (b) may, in particular—

(a)   

make special provision in relation to a person who, alone or together

with associates or connected persons, owns (otherwise than as a

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nominee) units or shares, in a fund designated by the Financial Services

Authority as a Qualified Investor Scheme, which represent 10% or

more (or such other percentage as the regulations may specify) of the

net asset value of the fund;

(b)   

include exceptions from provision made by virtue of paragraph (a)

40

above including, in particular, an exception relating to units or shares

held—

(i)   

by a charity (within the meaning of section 506(1) of ICTA),

(ii)   

by a registered pension scheme (within the meaning of section

150 of FA 2004),

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(iii)   

by an insurance company (within the meaning of section 431(2)

of ICTA) as assets of its long-term insurance fund (within the

meaning of that section), or

(iv)   

by such other persons, in such circumstances, as the regulations

may specify.

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Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 3 — Authorised investment funds etc

18

 

(4)   

Regulations under section 17(3)(c) may, in particular, require persons

responsible for the management of an authorised investment fund to supply

information to, and make available books, documents and other records for

inspection by, the Commissioners for Her Majesty’s Revenue and Customs.

(5)   

Regulations under section 17(3) may in particular—

5

(a)   

amend a reference in an enactment to a provision repealed by section

17(1);

(b)   

make different provision for different circumstances;

(c)   

make incidental, consequential, supplemental or transitional provision.

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Section 17: commencement and procedure

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(1)   

Section 17(1) shall come into force on such day as the Treasury may appoint by

order.

(2)   

An order under subsection (1) may—

(a)   

commence only a specified repeal;

(b)   

commence different repeals at different times;

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(c)   

commence a repeal at different times for different purposes;

(d)   

include savings.

(3)   

Regulations under section 17(3) shall be subject to annulment by a resolution

of the House of Commons.

(4)   

But the first set of regulations under section 17(3) may not be made unless a

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draft has been laid before and approved by resolution of the House of

Commons.

20      

Unauthorised unit trusts: chargeable gains

(1)   

Section 100 of TCGA 1992 (exemption for authorised unit trusts, &c.) shall be

amended as follows.

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(2)   

After subsection (2) insert—

“(2A)   

In determining whether subsection (2) applies no account shall be taken

of units in a scheme which—

(a)   

have been disposed of by a unit holder, and

(b)   

are held by the managers of the scheme (in that capacity)

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pending disposal.

(2B)   

In determining whether subsection (2) applies no account shall be taken

of the possibility of a charge to corporation tax on income in respect of

a gain accruing on a disposal by—

(a)   

an insurance company (within the meaning given by section

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431 of the Taxes Act), or

(b)   

a friendly society (being an incorporated friendly society or

registered friendly society within the meaning given by section

466(2) of the Taxes Act).”

(3)   

This section shall have effect for the year 2005-06 and subsequent years of

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assessment.

 
 

 
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Revised 1 July 2005