The genuine diversity of ownership condition
- Ensure your authorised investment fund meets the genuine diversity of ownership condition
UK Statutory Instrument
2006
United Kingdom
The Authorised Investment Funds (Tax) Regulations 2006
At a glance
What's here
22 compliance obligations
Who this Act binds
Plus 1 non-business duty on Crown ministers, regulators, local authorities or tribunals — shown collapsed under each section below.
What this Act requires
Sections that create concrete duties on businesses or carry penalties. Procedural and definitional sections are folded into the “Browse other sections” expander at the bottom of each group. Click any section title to read the source text on legislation.gov.uk.
Clearance in relation to the genuine diversity of ownership condition
- Apply to HMRC for clearance on genuine diversity of ownership
General rule for derivative contracts: exclusion of capital profits, gains or losses
- Do not include capital profits from derivatives in tax accounts
Treatment of interest in non-reporting fund: cases where the conditions in regulation 14ZA(2) would not be satisfied
- Notify HMRC of deemed disposal date for interest in non-reporting fund
The property investment business condition
- Maintain property investment business condition in governing documents and operations
The corporate ownership condition
- Prevent corporate ownership of 10% or more of the fund's net asset value
The loan creditor condition
- Ensure loan interest does not depend on your business results or asset value
Procedure relating to quashing notices
Other duties (1) — Crown / regulator
- HMRC must issue preliminary notice before quashing an entry into the Property AIF regime Statutory regulator
Deduction of tax from property income distributions
- Deduct income tax from property income distributions
Deduction of tax from PAIF distributions (interest)
- Deduct basic rate income tax from PAIF interest distributions
Distribution payments to be made without deduction of tax
- Do not deduct income tax from distributions when conditions A and B are met
Documents to be included with company tax return
- Include tax-exempt and residual income calculations with your company tax return
Information to be provided by company to which this Part applies
- Notify HMRC if your Property AIF loses qualifying status
Information relating to holders of excessive rights
- Report holders of excessive rights to HMRC
Information to be provided to officers of Revenue and Customs
- Provide information to HMRC within 28 days if served a notice
Payments in an accounting period
- Submit quarterly returns to HMRC for property income distributions
Certificates of deduction of tax
- Provide tax deduction certificate to recipients of relevant distributions
Company’s duty to deliver amended return
- Deliver amended tax return to HMRC without delay after discovering an error
Breach of the genuine diversity of ownership condition
- Notify HMRC of breach of genuine diversity of ownership condition within 28 days
The loan creditor condition
- Ensure loan creditor terms meet conditions A, B and C
Non-discrimination in respect of different classes of shares
- Do not discriminate between shareholders of different classes when allocating income
Elective FINROFs
- Elect to be treated as a FINROF and meet eligibility conditions
Browse 268 other sections — procedural / definitional / commencement
Citation, commencement and effect
Structure of these Regulations
Definition of “authorised investment funds”
Definition of “open-ended investment company”
Interpretation of expressions relating to authorised unit trust schemes
Further definitions generally relevant for authorised investment funds
Umbrella companies and umbrella schemes: interpretation
General interpretation
Abbreviations and general index
General rule for loan relationships: exclusion of capital profits, gains or losses
Accounts prepared in accordance with UK generally accepted accounting practice
Deduction of expenses
Treatment of interest distributions for purposes of loan relationships
Treatment of deficits on loan relationships
Authorised investment funds with limited investment powers – stamp duty reserve tax
Tax treatment of qualified investor schemes
The genuine diversity of ownership condition
Clearance in relation to the genuine diversity of ownership condition
Tax treatment of long-term asset funds
Tax treatment of diversely owned AIFs
Meaning of “investment transaction”
Meaning of relevant contracts: general
Meaning of relevant contract: options
Meaning of relevant contract: futures
Meaning of relevant contract: options and futures - general provisions
Meaning of relevant contract: contract for differences
Loan relationships or related transactions
Units in a collective investment scheme
Carbon emission trading products
Interests in offshore non-reporting funds: general
Treatment of disposal of interest in non-reporting fund
Index tracking funds
Interpretation
Funds excluded from the ambit of this Part
Allocation of income
Interest distributions: general
The qualifying investments test
Meaning of “qualifying investments”
Meaning of “qualifying investments”: further provisions
Dividend distributions: general
Provisions applying if amounts available for distribution are de minimis
Structure of this Part
Funds excluded from the ambit of this Part
Deduction of tax where interest distributions made
The reputable intermediary condition
The reputable intermediary condition: further provisions
Consequences of reasonable but incorrect belief
The residence condition
Residence declarations
References to beneficiaries in regulations 30 and 31
Interest distributions: the position of the legal owner
The offshore marketing condition
The non-liability condition
Qualifying certificates
The contents condition
The supplier condition
The time limit condition
The continuing validity condition
The qualifying circumstances condition
The joint holding condition
Qualifying certificates valid for only part of jointly held accounts: introductory
Qualifying certificates valid for only part of jointly held accounts: the general rule
Qualifying certificates valid for only part of jointly held accounts: further provisions
Consequences of notice under regulation 39(6)
Qualifying certificate not in writing
Annual Payments – duty to deduct income tax
Consequences of reasonable but incorrect belief
The obligation to deduct tax
General
Income treated as an annual payment treated as foreign income
Tax treated as deducted from a dividend distribution
Calculation of unfranked part of dividend distribution
References to gross income
Participants chargeable to corporation tax: holdings in qualified investor schemes and long-term asset funds where scheme does not meet the genuine diversity of ownership condition
Repayments of tax
Companies carrying on general insurance business: treatment of certain amounts of tax as foreign tax
Diversely owned AIFs and financial traders: treatment of shares and units
Financial traders: amounts to be brought into account in respect of shares or units held in diversely owned AIFs
Shares and units not within regulation 52C
Meaning of financial trader
Charge to tax under this Chapter
Meaning of “substantial QIS holding”
Amount charged to tax under this Chapter
Measuring dates and meaning of “chargeable measuring date”
How tax is charged under this Chapter: income tax
How tax is charged under this Chapter: corporation tax
Further provisions
The general rule
Cases affected by the coming into force of these Regulations
Cases involving the launch of qualified investor schemes
Cases where a participant's holding becomes substantial
Definition of the “first measuring date”
Calculation to be made on the first measuring date
Reorganisations etc.
Disposal of part of a substantial QIS holding
Disposal of the whole of a substantial QIS holding
No gain/no loss disposals
Property AIFs
Structure of this Part
Key concepts
Conditions for this Part to apply to company
Conditions for this Part to apply to a company where the company is also a qualified investor scheme
Meaning of “property investment business”
Property investment business: further provisions
Meaning of “property rental business”
Meaning of “intermediate holding vehicle”
The genuine diversity of ownership condition
The corporate ownership condition: further provisions
The balance of business conditions
The notification condition
Form and timing of notice under regulation 69O
Contents of notice under regulation 69O
Notice: further provisions: quashing notices
Appeal against quashing notice
Clearance in relation to the genuine diversity of ownership condition
Effects of entry
Duration
Ring-fencing of tax-exempt business
Chargeability to corporation tax
Meaning of “net income”
Calculation of net income of F (tax-exempt)
Cancellation of tax advantage
Appeal against notice under regulation 69Z10
Distribution to holder of excessive rights: charge to tax
Meaning of “holder of excessive rights”
Allocation of income
Property income distributions
PAIF distributions (interest)
PAIF distributions (dividends)
Property income distributions: liability to tax of participants
PAIF distributions (interest): liability to tax of participants
Components of income arising to F (residual)
Property distributions (dividends): liability to tax of participants
Distributions made after cessation
Manufactured dividends representing property income distributions
Manufactured dividends representing PAIF distributions (interest)
Manufactured dividends – PAIF distributions (dividends)
Interpretation
Conversion to property AIF
Exchange of units
Further requirement
Application of section 137 of TCGA
Calculation of net income of F (residual)
Collection and payment of tax
Assessments where relevant distribution included in return
Assessments in other cases
Application of Income Tax Acts provisions about time limits for assessments
Termination by notice: company
Termination by notice: Commissioners
Appeal against termination notice
Company ceasing to be authorised etc.
Mergers
Effects of cessation
Tax Elected Funds
Structure of this Part
Interpretation
Conditions for this Part to apply to fund
The property condition
The scheme documentation condition
Application process
Breach of the corporate ownership condition
Form and timing of application under regulation 69Z49
Contents of application under regulation 69Z49
Refusing an application: refusal notice
Appeal against refusal notice
Effects of entry
Duration
Components of income
Treatment of property investment income
Treatment of distributions
Allocation of income
Breach of the loan creditor condition
TEF distributions (dividends)
TEF distributions (non-dividend)
Participants chargeable to corporation tax
Obligation to deduct tax from TEF distributions (non-dividend)
Modification of section 490 of CTA 2009
Breach of conditions: general
Breach of the property condition, genuine diversity of ownership condition or scheme documentation condition
Breach of the loan creditor condition
Multiple breaches of separate conditions
Information to be provided to officers of Revenue and Customs
Breach of balance of business conditions
Termination by election: authorised investment fund
Termination by notice: Commissioners
Appeal against termination notice
Mergers
Multiple breaches of separate conditions
Profit/financing costs in the case of a Property AIF that is a qualified investor scheme
Application of section 234A of ICTA
Notification of interest distributions and TEF distributions (non-dividend) made without deduction of tax
Information about interest distributions and TEF distributions (non-dividend) made without deduction of tax
Inspection of records
Use of information
Inspection of residence declarations
Ownership of shares of different denominations in open-ended investment companies
Circumstances in which this Chapter applies
Ending of accounting period of the target trust
Carrying forward of excess management expenses
Distributions by authorised unit trust after the end of its pre-transfer accounting period
Continuing validity of residence declarations
Powers of the acquiring company
Assessments made on discovery
Prevention of double relief
FINROFs
Structure of this Part
Interpretation
The investment condition
Interests in funds treated as not being interests in non-reporting funds
Entry into FINROF regime: the basic rule
The requirement to notify where regulation 85D is satisfied
The requirement to notify participants when a fund enters the FINROF regime
Inadvertent fulfilment of investment condition
Appeal against refusal to provide written notice
Disposal of an interest in an authorised investment fund prior to its becoming a FINROF
The charge to tax: general provisions
The charge to tax: further provisions
Application of certain provisions of TCGA 1992
Application of section 10A of TCGA 1992
Exceptions from the charge to tax
Trading stock etc.
Long-term insurance funds of insurance companies
Charitable companies and charitable trusts
Application of this Chapter
Disposal of an asset: the basic rule
Provisions applicable on death
Application of section 135 of TCGA 1992
Application of section 136 of TCGA 1992
General provisions
The basic gain and its computation
Requirement to notify participants when a fund leaves the FINROF regime
Participant’s power to elect for deemed disposal
Earlier disposal to which the no gain/no loss basis applies
Modifications of TCGA 1992
Losses
Scope of this Chapter
Treatment of the TCGA disposal: general rules
Modification of section 162 TCGA 1992
Application of section 128 of TCGA 1992
Leaving the FINROF regime
Introduction
Amendments of TMA 1970
Amendment of ICTA
Amendment of TCGA 1992
Amendment of FA 1996
Amendments of ITTOIA 2005
Amendment of the Finance Act 2005
Introduction
Modifications of TMA 1970
Modifications of ICTA
Modifications of FA 1996
Modifications of ITTOIA 2005
Modification of CTA 2009
Introduction
Application of TCGA 1992: general
General modifications: introduction
General modification: authorised unit trust
General modification: manager of authorised unit trust
General modification: unit in authorised unit trust
General modification: accumulation units in authorised unit trusts
General modification: holder of unit in authorised unit trust
Modification of section 99 of TCGA 1992
Insertion of section 99AA of TCGA 1992
Modification of section 170 of TCGA 1992
Modifications of section 272 of TCGA 1992
Modifications of section 288 of TCGA 1992
Modification of Schedule A1 to TCGA 1992
Instruments revoked
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