The direct tax treatment of OEICs is established by the Authorised Investment Funds (Tax) Regulations 2006 (SI2006/964) which came into force on 1 April 2006. OEICs are one class of authorised investment fund (AIF) as defined by the regulations and authorised unit trusts (AUTs) constitute the second major class of AIF. The regulations operate principally by making modifications to the Tax Acts and to TCGA 1992. In particular, regulation 98 provides that TCGA 1992 applies to OEICs holdings in, a

A tax regime for UK investors in offshore funds was first introduced in 1984. Its purpose was to counter arrangements that had enabled investors within the charge to UK tax (‘UK investors’) to accumulate income in an offshore fund free of tax and, when the investment was realised, to be subject only to tax on capital gains instead of having to pay tax on income. By way of contrast, UK investors had to pay tax annually on income from UK funds. The ‘offshore fund rules’ were substantially updated

A non-reporting fund is any offshore entity that falls within the definition of an offshore fund but has not obtained reporting fund status (or has left or has been excluded from the reporting fund regime). In other words, it is an offshore fund to which Part 3 of the Offshore Fund (Tax) Regulations 2009 does not apply. A non-reporting fund is under no obligation to provide information to HMRC but it is likely that such a fund will be obliged by local law or by its constitution to provide inform

Gains which accrue to an authorised unit trust after 31 March 1980 are not chargeablegains. (Prior to 1 April 1980 all authorised unit trusts were within the charge toCorporation Tax and chargeable gains arising were subject to the special rules inICTA70/S355. For the treatment of capital gains accruing to investors see CG57680+).

TCGA92/S151 The Personal Equity Plan (PEP) was introduced with effect from 1 January 1987 to encourage wider share ownership. No new subscriptions may be made to a PEP after 5 April 1999. The Individual Savings Account (ISA) succeeds the PEP and subscriptions may be made to an ISA from 6 April 1999 onwards. Provided certain conditions are satisfied qualifying investments held in a PEP and in an ISA are exempt from Income Tax and Capital Gains Tax. Additional guidance is available in SAIM 2310 In

Unit holders in authorised unit trusts (AUTs), and shareholders in open-ended investment companies (OEICs), may receive income as an interest distribution or a dividend distribution (but not both in the same distribution period). ITTOIA05/S373 (for OEICs) and ITTOIA05/S376 (for AUTs) taxes the interest distributions as interest. The tax voucher which the investor receives from the AUT or OIEC will make it clear whether the receipt is an interest or a dividend distribution. An investor who holds

An income class unit or OEIC share gives the holder a right to receive regular income from a fund which represents the dividends paid to the fund from companies in which the fund holds securities. Such dividends can be passed onto the unit/OEIC shareholder according to their unit/share entitlement. The income distribution from the fund is paid in cash, although many unit/OEIC shareholders prefer to have an arrangement with the fund manager whereby the income distribution is automatically reinves

The tax regime for UK investors in offshore funds, introduced in 1984, was established on the basis that, if an offshore fund did not distribute at least 85% of its income then, on disposal of interests in the fund, UK investors would be charged to tax on income rather than on capital gains. This was to prevent the possibility of rolling up income in an offshore fund with any subsequent disposal being subject only to tax on capital gains, rather than being charged to tax as income. The rules wer

An investment trust is a non-close company which fulfils certain requirements, mainly concerned with how its funds are invested. If it meets these requirements, it is exempt from Corporation Tax on its chargeable gains. The taxation of investment trusts is dealt with in CG41400+. Shareholders in investment trusts are taxed in the same way as shareholders in any other company.

A Real Estate Investment Trust (REIT) is a vehicle that allows an investor to obtain broadly similar returns from their investment, as they would have, had they invested directly in property. The REIT is a limited company, or group of companies, meeting various conditions, that elects into the REIT regime. Whether the vehicle is a single company or a group, it is referred to in the legislation as a Real Estate Investment Trust. In this guidance, they are referred to as UK-REITs or Group REITs. T

Investment Trust Companies (ITCs) and Venture Capital Trusts (VCTs) are UK resident companies subject to corporation tax, but both are exempt from corporation tax on chargeable gains (TCGA 92/S100(1)). For most companies, the derivative contracts regime results in all profits and losses from derivative contracts coming into the corporation tax computation. Accordingly, special provisions are needed for ITCs and VCTs to maintain the exemption of capital profits. Profits or losses of a capital nat

In early 2010 the then Financial Services Authority changed its rules to allow authorised investment funds (AIFs) to invest in a wider range of offshore funds, including non-reporting offshore funds. At the same time a new tax regime for Funds Investing in Non-Reporting Offshore Funds (FINROF) was introduced – Part 6A of the Authorised Investment Fund (Tax) Regulations 2006 (SI 2006/964). The purpose of the regime is to move the point of taxation on gains to the investor so that institutional an

Authorised Investment Funds (AIFs) and Investment Trust Companies (ITCs) are forms of collective investment vehicles, which enable a number of investors to pool their assets and invest in a professionally managed investment portfolio. The generally applicable tax policy for such vehicles is to move the point of taxation on the funds’ income to investors and to tax investors in a broadly similar manner as would apply if they held the underlying investments directly, instead of through the investm

An investment trust is an investment company which has been approved as coming within the meaning of the term ‘investment trust’ as defined in CTA10/S1158. Broadly, that is a company that the HMRC Commissioners are satisfied meets conditions A to C as set out in S1158 (the ‘eligibility conditions’, see IFM14420 onwards) and that also meets the requirements of The Investment Trust (Approved Company) (Tax) Regulations 2011 (SI 2011/2999) (IFM14430 onwards) throughout the whole of an accounting per

deemed disposal at market value with gains spread over 7 years TCGA92/S212. Special rules for losses. Bond funds - unit trusts, OEICs and offshore funds If one of these funds meets the qualifying investments test, units held by a corporate are treated as rights under a creditor relationship and a distribution is treated as a loan relationship credit (or debit) – see CTA09/Part 6/CH 3 If qualifies as a bond fund not within chargeable gains rules as treated as loan relationship Authorised contract