Collectives: exemptions: exempt investments - interests in other collective investment schemes
The terms of a collective investment scheme (such as a unit trust or Open-Ended Investment Company (OEIC)) may permit investment by the scheme solely in the holding of ‘exempt’ investments’ or a mixture of both ‘exempt’ and ‘non-exempt’ investments. The provisions of FA86/S99(5A)(b) provide that no charge to Stamp Duty Reserve Tax (SDRT) arises under FA99/SCH19 or FA86/S87 when units or OEIC shares in the scheme are surrendered or otherwise transferred and the fund consists only of ‘exempt’ investments. Similarly, the provisions of Paragraph 5 of FA99/SCH19 permit a reduction in the amount of SDRT due under FA99/SCH19 where a fund holds both ‘exempt’ and ‘non-exempt’ investments.
Section 99(5B) Finance Act 1986 (for the purposes of both FA86/S87 and FA99/SCH19 ) provides rules for determining when an investment is regarded as exempt and differ for:-
- direct investments held other than an interest under a collective investment scheme, (See STSM105020 ) and
- investments that are holdings in other collective investments schemes (such as unit trusts and OEICs).
Investment holdings in other collective investment schemes
An investment in a collective investment scheme is to be regarded as an exempt investment under FA86/S99(5B)(b) if, and only if, both:
- the underlying scheme is a collective investment scheme as defined in the Financial Services and Markets Act 2000;
- the value of the underlying scheme’s non-exempt investments is no more than 20 per cent of the value of its total investments.
See STSM101010 for the meaning of a collective investment scheme.
See STSM101020 for the meaning of a unit trust.
See STSM101050 for the meaning of an open-ended investment company.