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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Authorised investment funds: collective investment schemes: general: what are they?


A collective investment scheme is a form of investment fund that enables a number of investors to ‘pool’ their assets and invest in a professionally managed portfolio of investments, typically gilts, bonds and quoted equities. Some investments, however, may be in unquoted investments or property. In effect, investors in such schemes are able to spread or reduce the risk that is associated with investment in such assets as well as gain the benefits of professional management. The reduction in risk is achieved because the wide range of investments in a collective investment scheme reduces the effect that any one investment can have on the overall performance of the portfolio.

Statutory Definition - section 235 Financial Services and Markets Act 2000

A collective investment scheme is defined as:

any arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.

Section 235 also provides that:

  1. The arrangements must be such that the persons who are to participate, ‘participants’, do not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions.
  2. The arrangements must also have either or both of the following characteristics:



    1. the contributions of the participants and the profits or income out of which payments are to be made to them are pooled,
    2. the property is managed as a whole by, or on behalf of, the operator of the scheme.

The definition is further refined by means of supplementary Regulations made by the Financial Services Authority (FSA) that provide for specific inclusions and exclusions.

Whether or not arrangements constitute a collective investment scheme is in the first instance a matter for the Financial Services Authority and ultimately the courts. CTIS (Collective Investment Schemes) should be consulted in all cases before it is accepted that arrangements do or do not constitute a collective investment scheme.