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HMRC internal manual

Company Taxation Manual

Authorised investment funds (AIFs): taxation of funds: groups (before 1 April 2006)

Authorised Investment Funds are either authorised unit trusts (AUTs) or open-ended investment companies (OEICs).

An AUT is not a company (although treated as one for the purposes of income arising to the trustees and for the purposes of provisions relating to relief for capital expenditure - ICTA88/S468 (1)) and does not have share capital. Group relief provisions therefore do not apply to AUTs. For the position with respect to the TCGA92 please see the first bullet point under ‘Capital gains or losses’ at CTM48245.

An OEIC is a company and it is possible that all or most of the shares of an OEIC may be owned by a body corporate, usually an insurance company. Whilst the shares in an OEIC are shares for most tax purposes, an OEIC does not have an ‘ordinary share capital’ for the purposes of the various definitions of a subsidiary in ICTA88/S838. In considering what is ‘ordinary share capital’ regard must be had to the nominal value or equivalent of shares not their market value or cost. An OEIC may start with a fund of a stated amount represented by shares of fixed value, but thereafter the shares would for market purposes be valued according to the prices at which the managers purchased shares, which in turn is calculated from the net asset value of the fund. Given that the fund would vary in amount as shares are bought and sold, it cannot be said that the fund is represented by a fixed stated capital divided into shares of fixed or nominal amount. Consequently it is not possible for group relief claims to be made where one of the companies concerned is an OEIC. It also follows for the same reason that an OEIC cannot be a subsidiary company for the purposes of the TCGA92.