CFM14001 - Collective investment schemes: overview and contents

Overview of guidance

This guidance describes the post FA 2002 provisions for the taxation of loan relationships, derivative contracts and forex. Please contact CT & VAT Technical where advice is needed on the pre-FA 2002 rules.

This part of the manual covers special provisions that are needed in respect of:

• Authorised Investment Funds (AIFs) (that is Authorised Unit Trusts (AUTs) &
• Open-ended Investment Companies (OEICs))
• Investment Trust Companies (ITCs)
• Venture Capital Trusts (VCTs)

AIFs are within the charge to corporation tax for income but gains accruing are not chargeable gains for corporation tax.

ITCs and VCTs are ordinary companies. But, unlike other companies, gains accruing are not chargeable gains for corporation tax.

The intention of this approach is to avoid a double layer of taxation, at both fund and investor levels, so that as far as possible investors are taxed as if they had directly invested in the underlying assets of the company or trust.

Further details may be found as follows:

Each of these concerns is, or is treated as, a company for corporation tax and comes within the loan relationships (including forex) and derivative contract regimes. These regimes make no distinction for most companies between the taxation of capital and revenue profits, gains and losses (see for example FA96/S84(1)(a)). Special provisions are accordingly required to ensure that the exemption from charge on capital is maintained. This part of the guidance explains these rules.

It also explains the special provisions that apply to companies holding loan relationships and derivative contracts via a holding in an AIF or a non-UK resident collective investment scheme (offshore fund).

Contents

The guidance in this section brings together loan relationships, forex and derivative contracts aspects. The topics covered are: