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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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AIFs: Property authorised investment funds (Property AIFs): tax treatment of Property AIFs and distributions: cancellation of tax advantage

Cancellation of tax advantage (regulation 69Z10 SI 2006/964)Where a manager of an open-ended investment company (OEIC) which is subject to the Property AIF regulations has used the provisions within those regulations in order to try to obtain a tax advantage for the OEIC or another person, a notice will be issued by the Commissioners of HMRC to the Property AIF specifying the tax advantage. When this is done HMRC will also counteract the advantage by an adjustment in one or more of the following ways:

  • an assessment,
  • the cancellation of a right of repayment,
  • a requirement to return a repayment already made, or
  • the computation or recomputation of profits or gains, or liability to tax, on a basis specified by the Commissioners of HMRC in the notice.A further remedy open to HMRC is to assess the company to an additional amount of income tax under Case VI of Schedule D as they think is equivalent to the value of the tax advantage.

Note that the term ‘tax advantage’ has the meaning given by section 709 ICTA 1988. But, an OEIC does not obtain a tax advantage by reason only of being within the Property AIF regulations unless it does something (whether before or during the application of those regulations) which is wholly or principally designed to create or inflate or apply a loss, deduction or expense (whether or not suffered or incurred by theOEIC).

Appeal against the issue of a notice (regulation 69Z11 SI 2006/964)Where a notice is issued for the reasons stated above, the Property AIF may appeal against the issue of the notice if it disagrees with it.

The notice of appeal must be sent to HMRC within a period of 28 days beginning with the day on which the notice under regulation 69Z10 SI 2006/964 was given.

If an appeal is later notified to the tribunal, the tribunal may:

  • affirm, vary or cancel the notice, and
  • affirm, vary or quash an assessment.The notice of appeal should be sent to:

Eric McLennan
Authorised Investment Funds Centre
Local Compliance Eastern England
Concept House
5 Young Street
Sheffield
S1 4LB