CFM14006 - Collective investment schemes: AIFs: derivative contracts

AIFs: AUTs and OEICs: derivative contracts

This guidance describes the post FA 2002 provisions for the taxation of loan relationships, derivative contracts and forex.

Authorised Unit Trusts (AUTs) are treated as UK resident companies for corporation tax purposes. Special taxation rules apply to AUTs and open-ended Investment companies (OEICs), which are UK resident companies.. For both gains are not chargeable gains for corporation tax (TCGA92/S100 (1))..

For most companies the introduction of the derivative contract regime resulted in all profits and losses on derivative contracts coming into the corporation tax computation. The regime, in general, makes no distinction between capital and revenue profits. Special provisions were accordingly required for AUTs and OEICs to maintain the exemption of capital profits.

These special provisions are currently in Regulation 11 SI 2006/964 (The Authorised Investment Funds (Tax) Regulations 2006):”the AIF Regulations”. They were originally in FA02/SCH26/PARAS32&33. When bringing into account profits and losses from the derivative contracts of an authorised investment fund any capital profits and losses are to be excluded. Capital profits and losses are defined as those dealt with under either of the headings

• net gains/losses on investments during the period or
• other gains/losses

in the statement of total return for the accounting period prepared in accordance with the Statement of Recommended Accounting Practice (SORP) relating to Authorised Investment Funds issued by the Investment Management Association. The latest version of this was issued on 5 January 2006 effective for accounting periods beginning on or after 1 January 2006.

Prior to the AIF Regulations FA02/SCH26/PARAS32&33 referred to the SORPs that applied to AUTs and OEICs respectively.

Please contact CT & VAT Technical where advice is needed on the pre-FA 2002 rules.