The Authorised Investment Funds (Tax) (Amendment) Regulations 2008
| Jurisdiction | UK Non-devolved |
| Citation | SI 2008/705 |
| Year | 2008 |
2008 No. 705
Income Tax
Corporation Tax
Capital Gains Tax
The Authorised Investment Funds (Tax) (Amendment) Regulations 2008
Made 12th March 2008
Laid before the House of Commons 12th March 2008
Coming into force 6th April 2008
The Treasury make the following Regulations in exercise of the powers conferred by sections 17(3) and 18 of the Finance (No. 2) Act 20051.
Citation and commencement
1. These Regulations may be cited as the Authorised Investment Funds (Tax) (Amendment) Regulations 2008 and shall come into force on 6th April 2008.
Amendment of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964)
2. The Authorised Investment Funds (Tax) Regulations 20062are amended as follows.
Amendment of regulation 2
3. In regulation 2 (structure of Regulations), after “Part 4 deals with the treatment of participants in authorised investment funds;”, insert—
“Part 4A deals with Property AIFs;”.
Amendment of regulation 12
4. In regulation 12(3)(a) (accounts prepared in accordance with UK generally accepted accounting practice) for “on 21st November 2003” substitute “in December 2005”.
Insertion of Part 4A
5. After regulation 69 insert the following Part—
“PART 4A
PROPERTY AIFS
CHAPTER 1
PRELIMINARY PROVISIONS
Property AIFs
69A.—(1) This Part enables an open-ended investment company which meets the conditions in regulations 69D to 69O—
(a)
(a) to benefit from the exemption from corporation tax in accordance with regulation 69Y(1), and
(b)
(b) to have liabilities to tax imposed on the company and on participants in accordance with Chapters 3, 4 and 5 of this Part.
(2) In these Regulations an open-ended investment company to which this Part applies may be referred to as a “Property AIF”.
Structure of this Part
69B. The structure of this Part of these Regulations is as follows—
This Chapter contains preliminary provisions;
Chapter 2 deals with entry into and membership of the Property AIF regime;
Chapter 3 deals with the tax treatment of Property AIFs;
Chapter 4 deals with distributions made by Property AIFs;
Chapter 5 deals with the treatment of participants in Property AIFs;
Chapter 6 deals with compliance in relation to the Property AIF regime; and
Chapter 7 contains provisions relating to an open-ended investment company’s leaving the Property AIF regime.
Key concepts
69C.—(1) In this Part “entry” means the time when this Part begins to apply to an open-ended investment company.
(2) In this Part “cessation” means the time when this Part ceases to apply to an open-ended investment company.
(3) In this Part, in relation to an open-ended investment company—
(a)
(a) “F (pre-entry)” means the open-ended investment company before this Part begins to apply to it,
(b)
(b) “F (tax-exempt)” means the open-ended investment company in so far as it carries on property investment business (within the meaning of regulation 69F) while this Part applies to it,
(c)
(c) “F (residual)” means the open-ended investment company in so far as it carries on business other than property investment business while this Part applies to it, and
(d)
(d) “F (post-cessation)” means the open-ended investment company after this Part has ceased to apply to it.
CHAPTER 2
ENTRY INTO AND MEMBERSHIP OF THE PROPERTY AIF REGIME
Conditions of membership of the Property AIF regime
(69D) Conditions for this Part to apply to company
In order for this Part to apply to an open-ended investment company in respect of an accounting period, the following conditions must be met—
(a)
(a) the property investment business condition (see regulation 69E);
(b)
(b) the genuine diversity of ownership condition (see regulation 69J);
(c)
(c) the corporate ownership condition (see regulation 693K);
(d)
(d) the loan creditor condition (see regulation 694M);
(e)
(e) the balance of business conditions (see regulation 69N); and
(f)
(f) the notification condition (see regulation 69O).
The property investment business condition
(69E) The property investment business condition
(1)
(1) The property investment business condition is that the open-ended investment company must meet conditions A and B throughout the accounting period.
(2)
(2) Condition A is that the company’s instrument of incorporation and its prospectus (including any supplements to the prospectus) include a statement that the company’s investment objectives are—
(a) to carry on property investment business, and
(b) to manage cash raised from investors for investment in the property investment business.
(3)
(3) Condition B is that the company must carry on property investment business.
(4)
(4) In this Part “prospectus” includes any supplements to a prospectus.
(69F) Meaning of “property investment business”
(1)
(1) In this Part “property investment business” means business consisting of any one or more of—
(a) property rental business (see regulation 69H);
(b) owning shares in UK-REITs; and
(c) owning shares or units in an entity in circumstances in which conditions A to C are met.
(2)
(2) In these Regulations “UK-REIT” means a company or group to which Part 4 of FA 2006 applies.
(3)
(3) Condition A is that the entity is—
(a) a property company, or
(b) a unit trust scheme or similar contractual arrangement—
(i) which is not a collective investment scheme,
(ii) which has defined capital,
(iii) which is listed on a recognised stock exchange, and
(iv) where there is no obligation on the manager of the scheme to provide opportunities for redemption of the investment.
(4)
(4) Condition B is that the entity is not within the charge to corporation tax.
(5)
(5) Condition C is that the entity is equivalent to a UK-REIT in the jurisdiction in which the property company is incorporated, or (as the case may be) in the jurisdiction in which the unit trust scheme or similar contractual arrangement carries on business.
(6)
(6) For the purposes of paragraph (3)(a) a property company is not equivalent to a UK-REIT if—
(a) the shares forming the company’s ordinary share capital are not listed on a recognised stock exchange, or
(b) it is a company to which section 236 of FISMA 20003applies.
(7)
(7) In this regulation “recognised stock exchange” has the meaning given by section 1005(1) of ITA 20074.
(8)
(8) This regulation is subject to the further provisions in regulation 69G.
(69G) Property investment business: further provisions
(1)
(1) If an open-ended investment company to which this Part applies receives a distribution from a UK-REIT—
(a) the distribution is income of F (tax-exempt) to the extent that the distribution represents business of C (tax-exempt) carried on by the UK-REIT, and
(b) the distribution is income of F (residual) to the extent that the distribution represents business other than business of C (tax-exempt) carried on by the UK-REIT.
(2)
(2) In paragraph (1) “C (tax-exempt)” shall be construed in accordance with Part 4 of the Finance Act 2006.
(3)
(3) If an open-ended investment company to which this Part applies receives a distribution from an entity within regulation 69F(1)(c), the distribution is income of F (tax-exempt) except to the extent that the distribution is identified, at the time at which it is made, as arising from any activity of the entity that is not property rental business.
(4)
(4) For the purposes of this Part an asset is involved in property investment business if—
(a) it is an estate, interest or right in or over land by the exploitation of which property rental business is conducted;
(b) it consists of shares owned by the open-ended investment company in a UK-REIT; or
(c) it consists of shares owned by the open-ended investment company in an entity within regulation 69F(1)(c).
(69H) Meaning of “property rental business”
(1)
(1) In this Part “property rental business” means—
(a) property rental business within the meaning given by section 104 of FA 2006, and
(b) the relevant business of an intermediate holding vehicle (see regulation 69I).
(2)
(2) For the purposes of paragraph (1)(b) the relevant business of an intermediate holding vehicle is its property rental business within the meaning given by section 104 of FA 2006, but disregarding subsection (1)(a) of that section.
(3)
(3) For the purposes of this Part an asset is involved in property rental business if—
(a) it is an estate, interest or right in or over land by the exploitation of which property rental business is conducted, or
(b) it consists of shares owned by the open-ended investment company in an intermediate holding vehicle.
(69I) Meaning of “intermediate holding vehicle”
(1)
(1) For the purposes of regulation 69H, an entity is an “intermediate holding vehicle” in an accounting period if it meets conditions A to F throughout the accounting period.
(2)
(2) Condition A is that the vehicle is a company, trust or partnership.
(3)
(3) Condition B is that the vehicle is not a collective investment scheme.
(4)
(4) Condition C is that the vehicle is wholly owned by the open-ended investment company (the “parent”) or another intermediate holding vehicle or series of intermediate holding vehicles wholly owned by the parent, unless and to the extent that local legislation or regulations relating to the intermediate holding vehicle holding the property specified in paragraph (5) requires a proportion of local ownership.
(5)
(5) Condition D is that the function of the intermediate holding vehicle is solely to enable the holding, by the parent, of estates, interests or rights in or over land outside the United Kingdom by the exploitation of which property rental business is conducted.
(6)
(6) Condition E is that the intermediate holding vehicle has its accounts consolidated with those of the parent.
(7)
(7) Condition F is that all property rental income of the intermediate holding vehicle (or the full proportion...
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