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HMRC internal manual

Company Taxation Manual

Authorised investment funds (AIFs): structure, arrangement and tax status of funds: umbrella funds or companies

An umbrella fund (in the case of an open-ended investment company - an umbrella company) is a type of authorised investment fund (AIF) that has a number of sub-funds and under which unit holders can exchange units in one sub-fund for units in another.

For tax purposes each sub-fund is treated as a separate AIF (see SI2006/964 Regulation 7 which covers both authorised unit trusts and open-ended investment companies).

This means that the umbrella company or trust is not treated as a company for tax purposes. It is ignored. Instead each separate sub-fund is regarded as an authorised unit trust or open-ended investment company, as the case may be, in its own right.

Similar legislation in TCGA92/S99A (authorised unit trusts) and section 99AA (open-ended investment companies) also treats each sub-fund separately for chargeable gains purposes. Detailed guidance on this legislation is at CG57701 onwards (authorised unit trusts) and CG57760 onwards (open ended-investment companies).

It follows from this that an exchange of units in one sub-fund for those of another constitutes a disposal of one asset and acquisition of another for the purposes of the taxation of chargeable gains (see CG57701 or CG57760 as appropriate).

Note on unauthorised unit trusts

Unauthorised unit trusts (UUTs) may also have an umbrella structure with sub-funds, if permitted by their trust deed. However for tax purposes the UUT as a whole is the taxable entity and is treated as a single UUT scheme. For further details of the tax treatment applying to UUTs see CTM48130.