# The Authorised Investment Funds (Tax) (Amendment No. 3) Regulations 2008, Note: Explanatory note


(This note is not part of the Regulations)
These Regulations amend the Authorised Investment Fund (Tax) Regulations 2006 (S.I. 2006/964) (“the principal Regulations”). These Regulations come into force on 1st January 2009.
Regulation 1 provides for the citation, commencement and effect of these Regulations and specifies how the regulations apply to investors in such schemes.
Regulation 2 contains interpretative provisions.
Regulation 3 introduces the amendments to the principal Regulations.
Regulation 4 inserts a reference to Part 2A in regulation 2 of the principal Regulations.
Regulations 5 to 9 make consequential provision to regulations 10 to 14 of the principal Regulations. The amendment in each case is consequent on amendments to the requirements of the genuine diversity of ownership condition. Regulation 7 also amends regulation 12 of the principal Regulations, in consequence of amendments made to the Investment Management Association’s Statement of Recommended Practice. This amendment, and the similar amendment effected by regulation 22 of these Regulations, is made as a result of changes to the Statement of Recommended Practice (“SORP”) issued by the Investment Management Association. A full copy of the SORP can be found atwww.investmentuk.org
Regulation 10 inserts a new regulation 14A, which excludes authorised investment funds which are constituted as unit trust schemes and which may only invest in a specified open-ended investment company to which Part 4A of the principal Regulations applies, from the charge to stamp duty reserve tax under Schedule 19 to the Finance Act 1999.
Regulation 11 inserts a new Part 2A into the principal Regulations comprising new regulations 14B to 14D. New regulation 14B provides that the tax provisions specified in the regulation (which collectively provide for beneficial tax treatment of the scheme and the investments in it) do not apply for an accounting period of the scheme unless the genuine diversity of ownership condition is met for that accounting period.
New regulation 14C specifies the conditions that the scheme must meet in order to meet the genuine diversity of ownership condition for an accounting period. It also makes provision for cases where an investment in the scheme is made by another unit fund.
New regulation 14D makes provision for an advance clearance system enabling a qualified investor scheme to apply to HMRC for clearance that it is or will meet the genuine diversity of ownership condition in relation to an accounting period.
Regulation 12 omits the reference to Chapter 4 from regulation 24 of the principal Regulations, which deals with the structure of Part 4 of those Regulations.
Regulation 13 amends regulation 48 of the principal Regulations, making consequential amendments and, by a new paragraph (2A), disapplying regulation 48(2) (which deals with how to calculate the unfranked part of a dividend distribution) to dividend distributions to which section 95 of ICTA (a distribution made by a company resident in the UK, or a payment that is representative of such a distribution) or section 219(4) of FA 1994 (UK distributions which are included in the profits from assets of a corporate member’s premium trust fund) apply. A new paragraph (2B) disapplies regulation 48(2) to dividend distributions paid to fund managers, where they hold rights in the fund in the ordinary course of their business as fund manager.
Regulation 14 amends regulation 49 of the principal Regulations to make different provision for calculating the unfranked part of a dividend distribution where a distribution is paid by one authorised investment fund to another.
Regulation 15 substitutes a new regulation 51 in the principal Regulations which deals with the case where a participant is chargeable to corporation tax and has a holding in a qualified investor scheme which does not meet the genuine diversity of ownership condition.
Regulation 16 substitutes a new regulation 52A in the principal Regulations which specifies, where certain conditions are met, the amount of tax that is to be treated as foreign tax in respect of distributions paid to a participant carrying on general insurance business.
Regulation 17 omits Chapter 4 of Part 4 of the principal Regulations.
Regulation 18 inserts a new regulation 69DA into the principal Regulations which provides that an open-ended investment scheme which is also a qualified investor scheme which meets the genuine diversity of ownership condition does not also need to meet the equivalent conditions in regulation 69J.
Regulation 19 amends regulation 69G of the principal Regulations by including shares in the assets that may be involved in property investment business for the purposes of Part 4A.
Regulation 20 amends regulation 69J of the principal Regulations, by making equivalent provision to that in the inserted regulation 14C(7) and (8) (by regulation 10 of these Regulations) regarding the requirement to provide information about a Property AIF that is also a qualified investor scheme.
Regulation 21 amends regulation 69K of the principal Regulations by substituting “participant” for “shareholder” in condition B.
Regulation 22 amends regulation 69L of the principal Regulations by clarifying that the prohibition is on acquiring shares as a participant in the open-ended investment company, and provides that it is the unit trust, not the trustees, which is treated as the beneficial owner of the shares.
Regulation 23 amends regulation 69Z of the principal Regulations in consequence of amendments made to the Investment Management Association’s Statement of Recommended Practice.
Regulation 24 amends regulation 69Z19 of the principal Regulations by substituting a new paragraph (1), which clarifies how PAIF distribution (interest) is to be treated depending on whether the participant is within the charge to corporation tax or income tax.
Regulation 25 amends regulation 69Z23 of the principal Regulations by substituting “basic rate” for “savings rate” in paragraph (1) and by omitting paragraph (3) (which defines “savings rate”).
Regulation 26 amends regulation 69Z24 of the principal Regulations by inserting new paragraphs (3A and (3B) which provide for circumstances in which conditions A and B specified in paragraphs (2) and (3) shall not be met.
Regulation 27 inserts new regulations 69Z24A, 69Z24B, 69Z24C and 69Z24D into the principal Regulations. Regulation 69Z24A makes provision as to the treatment of manufactured dividends which represent property income distributions. Regulation 69Z24B makes provision as to the treatment of manufactured dividends representing PAIF distributions (interest). Regulation 69Z24C makes provision as to the treatment of manufactured dividends representing PAIF distributions (dividends). Regulation 69Z24D contains interpretative provisions.
Regulation 28 amends regulation 94 of the principal Regulations by treating as inserting after paragraph (b) of section 432A(1ZA) of ICTA a new paragraph (ba) which includes a reference to income from property income distributions by an open-ended investment company in the definition of “income”.
Regulation 29 makes consequential omissions and an amendment to the Schedule of defined terms in the principal Regulations.
Regulations 30 and 31 make transitory provision for qualified investor schemes authorised by the Financial Services Authority before 1st January 2009.
A full and final Impact Assessment has not been prepared for this instrument as a negligible impact on the private or voluntary sectors is foreseen.

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Source: https://www.legislation.gov.uk/uksi/2008/3159/note (the official version)
Page: https://openlegislation.uk/authorised-investment-funds-tax-amendment-no-3-regulations-2008/note
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.