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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
Updated
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Tax elected funds (TEFs): tax treatment of distributions in the hands of participants: accumulation units

An authorised investment fund (AIF) may issue different classes of units, subject to approval by the Financial Services Authority (FSA), see CTM48420.

Accumulation units in an AIF give rise to income (net of any tax deducted) that is credited periodically to the capital property of the fund and reinvested by the AIF, instead of paying out the income to the unitholder.

Amounts transferred to the capital property of the fund, for the benefit of the holders of accumulation units, are taxable in the hands of participants in the same way as if those amounts had been distributed. Therefore, CTM48943 to CTM48946 apply equally to accumulation units as they do to income units.