IFM03335 - Authorised investment funds (AIFs): taxation of investors within the charge to CT: financial traders and diversely owned AIFs: meaning of "financial trader"

Regulation 52E of SI2006/964

Regulation 52E defines a financial trader as a person carrying on a business which is:

  • A banking business;
  • An insurance business; or
  • A business consisting wholly or partly in dealing in “trading assets” such that any profit on such assets would form part of the trading profit of that business.

“Trading assets” for these purposes means:

  • Stocks and shares;
  • Relevant contracts;
  • Loan relationships;
  • Units in collective investment schemes;
  • Securities;
  • Foreign currency; and
  • Carbon emission trading products.

An insurance business for the purposes of Regulation 52E does not include a life assurance business, or that part of a wider insurance business that is life assurance business, carried on by a company. The special tax rules for life assurance companies are not affected by regulations 52B and 52C.

Where a financial trader transfers trading assets to a diversely owned AIF under, or as part of, an arrangement which has an unallowable purpose, and a person connected with the financial trader either holds units in that AIF at the time of the transfer or later acquires units in that AIF, that connected person is also treated as a financial trader. An arrangement has an unallowable purpose if the main or one of the main purposes is to obtain a tax advantage within the meaning of section 1139 of the Corporation Tax Act 2010 or an income tax advantage within the meaning of section 683 of the Income Tax Act 2007, for any person.