CG41562 - Open-ended investment companies (OEICs): SI2006/964
The direct tax treatment of OEICs is established by the Authorised Investment Funds (Tax) Regulations 2006 (SI2006/964) which came into force on 1 April 2006. OEICs are one class of authorised investment fund (AIF) as de-fined by the regulations. and authorised unit trusts (AUTs) constitute the second major class of AIF. The regulations operate principally by making modifications to the Tax Acts and to TCGA 1992. In particular, regulation 98 provides that TCGA 1992 applies to
- OEICs
- holdings in, and the assets of, OEICs
- transactions involving OEICs
in the same way as it applies to AUTs, rights under and assets
subject to such trusts, and transactions for purposes connected
with such trusts. In broad terms, this means that the gains of an
OEIC are not subject to Corporation Tax and shares in an OEIC, like
units in a unit trust, are treated in the same way as other shares.
It also means that provisions in the Tax Acts and TCGA 1992 which
are generally applicable to companies but which do not apply in
relation to authorised unit trusts - for example, the group relief
rules - do not apply in relation to OEICs.
An OEIC cannot be the principal company of a group for
chargeable gains purposes. Regulation 107 modifies TCGA92/S170 to
make this clear. An OEIC also cannot be a member of a group for
chargeable gains purposes as it does not have ordinary share
capital (CTM 48245 and 48250).
The distinction between capital and income profits, gains and
losses is not recognised in the context of loan relation-ships and
derivative contracts. Regulations 10 and 11 modify Chapter 2 of
Part 4 Finance Act 1996 (loan relationships) and Schedule 26
Finance Act 2002 (derivative contracts) respectively to ensure that
capital profits gains or losses are not brought into account when
computing amounts taxable on an AIF.
