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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Authorised investment funds: taxation of participants within the charge to IT: financial traders and diversely owned AIFs: special rules

SI2006/964 Regulations 52B - 52D

Regulations 52B to 52D set out special rules applying to financial traders (see CTM48535) holding units in diversely owned AIFs (see CTM48280). The rules require the financial trader to include in its computation of trading profits for IT purposes:

  • All distributions; and
  • All realised and unrealised gains/losses

in respect of the units in the diversely owned AIF arising in each period of account.

Realised and unrealised gains/losses in a period of account are calculated by reference to the difference between the actual disposal value, or market value at the end of the period of account where the units have not been disposed of, and the market value at the end of the previous period of account, or the acquisition cost if the units were acquired during the period of account.

Market value means the price published by the manager of the AIF on the appropriate day, or nearest preceding day. Where the manager publishes both buying and selling prices, the market value will be the buying price (which will be the lower of the two).

The special rules do not apply where the units in the diversely owned AIF are included in the financial trader’s trading stock and all profits/losses, including distributions, are included in the computation of trading profits on the basis of fair value accounting. This is because in such cases the financial trader will already be recognising the distributions and realised/unrealised gains/losses required by regulations 52B and 52C.