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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
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Authorised investment funds (AIFs): structure, arrangement and tax status of funds: unit classes

An authorised investment fund (AIF) may issue different classes of unit, subject to approval by the Financial Conduct Authority (FCA).

(Note that the use of ‘unit’ in an AIF here, as in the FCA rules and in the tax rules (SI2006/964) means either a unit in an authorised unit trust or a share in an open-ended investment company).

The units in an AIF may for example include:

  • income units - in which the income is allocated periodically to unit holders net of any tax deducted, that is the amount of any income distribution is paid to unitholders;
  • accumulation units - in respect of which income (again net of any tax deducted) is credited periodically to capital and reinvested, in this case the income is not paid out to the unitholder but is added to the capital of the fund;
  • currency class units - in respect of which the price is calculated and the distributions are paid in a different currency to the base currency of the fund;
  • gross income or accumulation units - in respect of which the holders are entitled to receive gross distributions and so the income is allocated to unitholders or credited to capital, as the case may be, without deduction of tax;
  • (in the case of an open-ended investment company the units are shares and have a denomination - the company may then issue shares of different denominations where the smaller denomination shares represent a proportion in line with the denomination of the rights attaching to a larger denomination share).

An AIF may not issue any class of unit where the rights to participate in the underlying capital and income property of the fund or distributions are different from those of any other unit class other than by value. Unit classes may however reflect accumulation or distribution of income, different currencies and different charging structures.

Please refer to the FCA ‘COLL’ handbook if more detail is required ().