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HMRC internal manual

Company Taxation Manual

Authorised investment funds (AIFs): taxation of funds: trading or investment - ‘investment transactions’ - units in a collective investment scheme

SI2006/964 Regulation 14M - units in a collective investment scheme

Regulation 14M provides that any transaction in units in a collective investment scheme is an investment transaction for the purposes of regulation 14E.

The definition of ‘collective investment scheme’ in regulation 8 is widely drawn and encompasses any arrangements under which participants share in, or receive profits or income arising from the acquisition, holding, management or disposal of any property (whether the participants become the owners of the property or otherwise). The arrangements must also be such that:

  • The participants do not have day-to-day control over the management of the property; and either
  • The contributions of the participants and the profits or income out of which payments are made are pooled; or
  • The property is managed as a whole by or on behalf of the scheme operator.

This definition can encompass arrangements such as unit trust schemes, contractual arrangements such as Common Contractual Funds (CCFs) and Fonds Commun de Placement (FCPs), and partnerships, whether incorporated or unincorporated.

The term ‘units’ is also given a wide definition and means the rights or interests of the participants in a collective investment scheme, however those rights or interests are described. Rights under a contractual arrangement such as an FCP, for example, are within the meaning of ‘units’ in regulation 8, as are membership interests in a partnership, as well as interests actually represented by the issue of units (as in the case of a unit trust).

For the purposes of regulation 8, no account is taken of the transparency or opacity of the vehicle by virtue of which the arrangements subsist. Provided the transaction is in rights or interests in a collective investment scheme meeting the requirements of paragraphs (2) to (5) of regulation 8, it is an ‘investment transaction’ for the purposes of regulation 14E.