The Authorised Investment Funds (Tax) Regulations 2006

PART 4 U.K.THE TREATMENT OF PARTICIPANTS IN AUTHORISED INVESTMENT FUNDS

CHAPTER 1U.K.PRELIMINARY PROVISIONS

Structure of this PartU.K.

24.  The structure of this Part of these Regulations is as follows—

• this Chapter contains preliminary provisions;

• Chapter 2 contains provisions relating to the tax treatment of participants chargeable to income tax;

• Chapter 3 contains provisions relating to the tax treatment of participants chargeable to corporation tax;

• Chapter 4 imposes a charge to tax on substantial QIS holdings in qualified investor schemes.

Funds excluded from the ambit of this PartU.K.

25.  This Part does not apply to an authorised investment fund if the fund—

(a)is a registered pension scheme within the meaning of Part 4 of the Finance Act 2004 M1, or

(b)is treated, under paragraph 1(1) of Schedule 36 to that Act, as having become such a scheme.

CHAPTER 2U.K.PARTICIPANTS CHARGEABLE TO INCOME TAX

Deduction of tax from interest distributions: generalU.K.

Deduction of tax where interest distributions madeU.K.

26.—(1) This regulation applies if an interest distribution is made for a distribution period to a participant chargeable to income tax.

(2) Any obligation to deduct a sum under section 349(2) of ICTA M2 is subject to the provisions of this regulation.

(3) In this Part the “deduction obligation” means the obligation specified in paragraph (2).

(4) The deduction obligation does not apply to the interest distribution if—

(a)the participant is a company;

(b)the participant consists of the trustees of a unit trust scheme;

(c)the reputable intermediary condition is met with respect to a participant on the distribution date (see regulation 27); [F1or]

(d)the residence condition is met with respect to a participant on the distribution date (see regulation 30); F2...

F2(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) But if the participant is a company which is the trustee of the trust to which (or under which) the interest distribution is made (or received), the deduction obligation is not excluded by virtue of paragraph (4)(a).

(6) In its application to an interest distribution to a participant in respect of accumulation units, the deduction obligation is an obligation to deduct a sum out of the amount being credited to scheme capital on the participant's behalf.

The reputable intermediary conditionU.K.

The reputable intermediary conditionU.K.

27.—(1) The reputable intermediary condition is met with respect to a participant on the distribution date if conditions A to C are met.

(2) Condition A is that the interest distribution is paid on behalf of the participant to a company.

(3) Condition B is that the legal owner has reasonable grounds for believing that the participant is not ordinarily resident in the United Kingdom.

(4) Condition C is that the company mentioned in paragraph (2)—

(a)is subject to the EC Money Laundering Directive,

(b)is subject to equivalent non-EC provisions, or

(c)is a company which—

(i)is resident in a regulating country or territory, and

(ii)is an associated company of a company which is subject to paragraph (a) or (b).

The reputable intermediary condition: further provisionsU.K.

28.—(1) This regulation applies for the purposes of Condition C in regulation 27.

(2) A company is subject to the EC Money Laundering Directive if it is a credit institution or financial institution as defined by Article 1 of Directive 91/308/EEC, as amended by Directive 2001/97/EC.

(3) A company is subject to equivalent non-EC provisions if it is required by the law of any country or territory which is not a member State to comply with requirements similar to those which, under Article 3 of that Directive (as so amended), member States must ensure are complied with by credit institutions and financial institutions.

(4) A country or territory is a regulating country or territory if it either is a member State or imposes requirements similar to those which, under Article 3 of that Directive (as so amended), member States must ensure are complied with by credit institutions and financial institutions.

(5) A company is to be treated as another's associated company if it would be so treated for the purposes of Part 11 of ICTA (close companies) (see section 416 of that Act).

Consequences of reasonable but incorrect beliefU.K.

29.—(1) This regulation applies if conditions A to D are met.

(2) Condition A is that an interest distribution is made to a participant.

(3) Condition B is that the legal owner, in reliance on the reputable intermediary condition being met with respect to the participant, does not comply with the deduction obligation in relation to the interest distribution.

(4) Condition C is that the deduction obligation would apply but for the reputable intermediary condition being met.

(5) Condition D is that (contrary to the belief of the legal owner) the participant is in fact ordinarily resident in the United Kingdom.

(6) Section 350 of ICTA M3 (charge to tax where payments made under section 349) and Schedule 16 to that Act M4 (collection of income tax on company payments which are not distributions) have effect as if the deduction obligation applied.

The residence conditionU.K.

The residence conditionU.K.

30.—(1) The residence condition is met with respect to a participant on the distribution date if any of conditions A to E is met.

(2) Condition A is that, in relation to an interest distribution which is not made to or received under a trust, there is a valid declaration, made by the participant, that the participant is not ordinarily resident in the United Kingdom.

(3) Condition B is—

(a)that the participant holds the units as the personal representative of a deceased person, and

(b)that the deceased, before his death, made a declaration, valid at the time of his death, that he was not ordinarily resident in the United Kingdom.

(4) Condition C is—

(a)that the participant holds the units as the personal representative of a deceased person, and

(b)that the personal representative has made a declaration that the deceased, immediately before his death, was not ordinarily resident in the United Kingdom.

(5) Condition D is that, in the case of an interest distribution made to or received under a trust where the whole of the income is, or falls to be treated as, or under any provision of the Tax Acts is deemed to be, the income of a person other than the trustees of that trust, there is a valid declaration, made by the person in question that he is either not ordinarily resident or, in the case of a company, not resident in the United Kingdom.

(6) Condition E is that, in circumstances in which condition D does not apply and with respect to a participant in the case of an interest distribution made to or received under a trust, there is a valid declaration, made by the trustees of that trust that—

(a)the trustees are not resident in the United Kingdom, and

(b)each beneficiary of the trust is either not ordinarily resident or, in the case of a beneficiary which is a company, not resident in the United Kingdom.

Residence declarationsU.K.

31.—(1) A declaration made for the purposes of regulation 30 must—

(a)be in such form as may be required or authorised by the Commissioners;

(b)be made in writing to the legal owner of the authorised investment fund in question; and

(c)contain any details or undertakings required by paragraphs (2) to (4) below.

(2) A declaration made for the purposes of condition A or B in regulation 30 must contain—

(a)the name and principal residential address of the person making it; and

(b)an undertaking that he will notify the legal owner if he becomes ordinarily resident in the United Kingdom.

(3) A declaration made for the purposes of condition C in regulation 30 must contain the name of the deceased and his principal residential address immediately before his death.

(4) A declaration made for the purposes of condition D or E in regulation 30 must contain—

(a)the names and principal residential addresses of the trustees of the trust or, in the case of a trustee which is a company, the name of the company and the address of its registered or principal office;

(b)the names and principal residential addresses of the beneficiaries of the trust or, in the case of a beneficiary which is a company, the name of the company and the address of its registered or principal office; and

(c)an undertaking that the trustees of the trust will notify the legal owner of the authorised investment fund in question if—

(i)they become resident in the United Kingdom,

(ii)any beneficiary of the trust named in the declaration becomes ordinarily resident or, in the case of a company, resident in the United Kingdom, or

(iii)any person who becomes a beneficiary of the trust after the making of the declaration either is at the time of becoming a beneficiary, or subsequently becomes, ordinarily resident or, in the case of a company, resident in the United Kingdom.

References to beneficiaries in regulations 30 and 31U.K.

32.  In regulations 30 and 31 references to a beneficiary are references to any person who is known to the trustees of the trust to be either—

(a)a person who is or will or may become, entitled to any income of the trust, whether in the form of income or not, or

(b)a person to whom any such income may be paid, or for whose benefit any such income may be applied, whether in the form of income or not, in the exercise of a discretion by them.

Interest distributions: the position of the legal ownerU.K.

33.—(1) For the purposes of determining whether an interest distribution should be made with or without any deduction, the legal owner is entitled to treat a declaration made for the purposes of regulation 30 as valid.

(2) But the legal owner may not treat a declaration as valid if condition A or B is met.

(3) Condition A is that the legal owner receives a notification in compliance with an undertaking under regulation 31 that a person in question has become resident or ordinarily resident in the United Kingdom.

(4) Condition B is that the legal owner comes into possession of information by some other means which indicates that such a person is or may be resident or ordinarily resident in the United Kingdom.

The non-liability conditionU.K.

The non-liability conditionU.K.

F334.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying certificatesU.K.

F335.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The contents conditionU.K.

F336.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The supplier conditionU.K.

F337.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The time limit conditionU.K.

F338.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The continuing validity conditionU.K.

F339.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The qualifying circumstances conditionU.K.

F340.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The joint holding conditionU.K.

F341.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying certificates valid for only part of jointly held accounts: introductoryU.K.

F342.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying certificates valid for only part of jointly held accounts: the general ruleU.K.

F343.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying certificates valid for only part of jointly held accounts: further provisionsU.K.

F344.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consequences of notice under regulation 39(6)U.K.

F345.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying certificate not in writingU.K.

F346.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER 3U.K.PARTICIPANTS CHARGEABLE TO CORPORATION TAX

Interest distributionsU.K.

The obligation to deduct taxU.K.

47.—(1) This regulation applies if an interest distribution is made for a distribution period to a participant chargeable to corporation tax.

(2) The deduction obligation does not apply to the interest distribution.

(3) But if the participant is a company which is the trustee of the trust to which (or under which) the interest distribution is made (or received), the deduction obligation is not excluded by virtue of paragraph (2).

(4) In its application to an interest distribution to a participant in respect of accumulation units, the deduction obligation is an obligation to deduct a sum out of the amount being invested on the participant's behalf.

Dividend distributionsU.K.

GeneralU.K.

48.—(1) Paragraph (2) applies if—

(a)a dividend distribution for a distribution period is made to a participant by the legal owner of an authorised investment fund, and

(b)on the distribution date for that distribution period the participant is within the charge to corporation tax.

(2) For the purpose of computing the corporation tax chargeable upon the participant, the unfranked part of the dividend distribution is treated—

(a)as an annual payment and not as a dividend distribution or an interest distribution; and

(b)as having been received by the participant after deduction of income tax at the lower rate for the year of assessment in which the distribution date falls, from a corresponding gross amount.

(3) Regulation 49 explains how to calculate the unfranked part of the dividend distribution.

Calculation of unfranked part of dividend distributionU.K.

49.—(1) This is how to calculate the unfranked part of the dividend distribution—

(2) In paragraph (1)—

• U = the unfranked part of the dividend distribution to the participant;

• A = the amount of the dividend distribution;

• C = such amount of the gross income as does not derive from franked investment income, as reduced by an amount equal to the legal owner's net liability to corporation tax in respect of the gross income;

• D = the amount of the gross income, as reduced by an amount equal to the legal owner's net liability to corporation tax in respect of the gross income.

(3) Any reference in this regulation to the legal owner's net liability to corporation tax in respect of the gross income is a reference to the amount of the liability of the legal owner to corporation tax in respect of that gross income less the amount (if any) of any reduction of that liability which is given or falls to be given in accordance with any arrangements having effect by virtue of section 788 of ICTA (relief by agreement with other territories) or by way of a credit under section 790(1) of that Act (unilateral relief).

References to gross incomeU.K.

50.  For the purposes of this Chapter the references to the gross income are references to the gross income entered in the distribution accounts for the purpose of computing the total amount available for distribution to participants for the distribution period in question.

Cases where participant is the manager of the fundU.K.

51.  If on the distribution date the participant is the manager of the authorised investment fund, regulation 48(2) shall not apply in so far as the rights in respect of which the dividend distribution is made are held by him in the ordinary course of his business as manager of the fund.

Repayments of taxU.K.

52.—(1) This regulation applies if, in relation to a dividend distribution, any tax is treated as having been deducted by virtue of regulation 48(2)(b).

(2) The amount to which the participant is entitled by way of repayment of that tax must not exceed the amount of the participant's portion of the legal owner's net liability to corporation tax in respect of the gross income.

(3) In calculating the amount to which the participant is entitled by way of repayment of that tax, tax treated as having been deducted by virtue of regulation 48(2)(b) is set off in priority to any other tax under section 7(2) of ICTA and under paragraph 5 of Schedule 16 to that Act.

(4) For the purposes of paragraph (2) the participant's portion shall be determined by reference to the proportions in which participants have rights in the authorised investment fund in the distribution period in question.

[F4Banks and other financial traders: treatment of certain amounts of tax as foreign taxU.K.

52A.—[F5(1) This regulation applies if—

(a)conditions A to C are met, and

(b)either condition D or E is met.]

(2) Condition A is that an authorised investment fund makes a dividend distribution to which regulation 48(2) applies.

(3) Condition B is that there is some foreign tax suffered by the authorised investment fund in respect of which relief is given or falls to be given in accordance with any arrangements having effect by virtue of section 788 of ICTA (relief by agreement with other territories) or by way of a credit under section 790(1) of that Act (unilateral relief).

(4) Condition C is that the dividend distribution is made to a participant carrying on—

(a)a banking business, or

(b)any other business where a distribution from an authorised investment fund is treated as a trading receipt.

(5) Condition D is that the participant, either alone or together with connected persons (and otherwise than as a nominee or bare trustee), owns units which represent rights to 50% or more of the net asset value of the authorised investment fund.

(6) But [F6for the purposes of paragraph (5)] rights in an authorised investment fund held as assets of a company’s long-term insurance fund are not treated as held by the participant (either alone or together with connected persons) for the purposes of determining whether the participant owns units which represent rights to 50% or more of the net asset value of the authorised investment fund.

[F7(6A) Condition E is that the participant is a financial trader who—

(a)owns units which represent rights to 10% or more of the net asset value of the authorised investment fund, and

(b)does not own those units as a nominee or bare trustee.]

(7) Section 839 of ICTA (connected persons) applies for the purposes of this regulation.

(8) For the purposes of the specified provisions, an amount of tax equal to the participant’s portion of the foreign tax mentioned in paragraph (3) is treated as foreign tax and not as United Kingdom tax.

(9) For the purposes of paragraph (8) the participant’s portion shall be determined by reference to the proportions in which participants have rights in the authorised investment fund in the distribution period in question.

(10) In paragraph (8) “the specified provisions” means—

(a)section 798A of ICTA (limits for credit on foreign tax: corporation tax on trade income), and

(b)section 804C of ICTA (insurance companies: allocation of expenses etc. in computations under Case I of Schedule D) to the extent that it applies to business of a company which is not long-term business.]

[F8(11) In this regulation—

“financial trader” means a participant who meets condition C (see paragraph (4));

“long-term business” and “long-term insurance fund” have the same meanings as in Chapter 1 of Part 12 of ICTA (insurance companies etc.).]

CHAPTER 4U.K.CHARGE TO TAX ON SUBSTANTIAL QIS HOLDINGS IN QUALIFIED INVESTOR SCHEMES

GeneralU.K.

Charge to tax under this ChapterU.K.

53.—(1) A participant is charged to tax under this Chapter if the participant owns a substantial QIS holding in a qualified investor scheme.

(2) But a participant is excepted from the charge to tax under this Chapter if the participant is—

(a)a charity within the meaning of section 506(1) of ICTA;

(b)a registered pension scheme within the meaning of Part 4 of the Finance Act 2004 M5;

(c)a scheme which is treated, under paragraph 1(1) of Schedule 36 to the Finance Act 2004, as a registered pension scheme within the meaning of Part 4 of that Act;

(d)an insurance company within the meaning of section 431(2) of ICTA M6 holding the units in the qualified investor scheme as assets of its long-term insurance fund;

(e)a friendly society within the meaning of section 466(2) of ICTA M7;

(f)a person for whom any profit on a sale of the units in the qualified investor scheme would be treated as a trading profit of its trade; or

(g)a qualified investor scheme.

(3) In these Regulations a “qualified investor scheme” means a fund, authorised by the Financial Services Authority, in which a statement that the fund is a qualified investor scheme is included in the instrument constituting the scheme.

(4) In paragraph (2)(d) “long-term insurance fund” has the meaning given by section 431(2) of ICTA M8.

Meaning of “substantial QIS holding”U.K.

54.—(1) For the purposes of this Chapter a participant owns a substantial QIS holding in a qualified investor scheme if the participant, either alone or together with associates or connected persons, (and otherwise than as a nominee or a bare trustee) owns units which represent rights to 10% or more of the net asset value of the fund.

This is without prejudice to what is meant by “substantial” where the word appears in other contexts.

(2) Section 417 of ICTA M9 applies for the purposes of this regulation to determine whether persons are associates.

(3) Section 839 of ICTA M10 (connected persons) applies for the purposes of this regulation.

(4) A participant who owns a substantial QIS holding in a qualified investor scheme continues to own a substantial QIS holding in that scheme until the date on which the whole of that holding is disposed of (so that, accordingly, it does not matter that the holding no longer represents 10% or more of the net value of the qualified investor scheme).

(5) Paragraph (4) is subject to regulation 63 (cases where a participant's holding becomes substantial).

Amount charged to tax under this ChapterU.K.

55.—(1) A participant is charged to tax under this Chapter by reference to the difference in value of a substantial QIS holding between two measuring dates (the “difference in value”).

(2) The difference in value is the amount given by the formula—

(3) In paragraph (2)—

• VLMD is the market value of the substantial QIS holding at the beginning of a chargeable measuring date (the “later measuring date”), and

• VEMD is the market value of the substantial QIS holding at the end of the previous measuring date (the “earlier measuring date”).

(4) In the case of units in a qualified investor scheme where both the buying and selling prices of units are published regularly by the manager of the scheme, “market value” means an amount equal to the buying price (that is the lower price) so published on any particular date, or if none were published on that date, on the latest date before.

(5) In the case of units in a qualified investor scheme where a single price is published regularly by the manager of the scheme, “market value” means the price so published on any particular date, or if none were published on that date, on the latest date before.

Measuring dates and meaning of “chargeable measuring date”U.K.

56.—(1) Each of the following is a measuring date—

(a)the first measuring date (see regulation 64);

(b)in a case where a participant already owns a substantial QIS holding in a qualified investor scheme, the date on which the participant acquires additional units in the qualified investor scheme;

(c)any reporting date;

(d)the date on which there is a disposal of part of the substantial QIS holding (see regulation 67);

(e)the date on which there is a disposal of the whole of the substantial QIS holding (see regulation 68);

(f)the date of the participant's death.

(2) In this Chapter a “chargeable measuring date” means any measuring date other than the first measuring date.

How tax is charged under this Chapter: income taxU.K.

57.—(1) This regulation applies in the case of a participant chargeable to income tax.

(2) The following amounts must be calculated—

(a)the difference in value calculated by reference to each chargeable measuring date falling within a tax year; and

(b)the aggregate amount of those differences in value.

(3) If the aggregate amount is a positive amount, the participant is charged to income tax under Chapter 8 of Part 5 of ITTOIA 2005 (income not otherwise charged) on that aggregate amount for that tax year.

(4) If the aggregate amount is a negative amount, the participant is treated as if—

(a)a loss of that aggregate amount had been sustained by the participant in a transaction, and

(b)this regulation were listed in Part 3 of the Table in section 836B M11 of ICTA.

How tax is charged under this Chapter: corporation taxU.K.

58.—(1) This regulation applies in the case of a participant chargeable to corporation tax.

(2) The following amounts must be calculated—

(a)the difference in value calculated by reference to each chargeable measuring date falling within an accounting period; and

(b)the aggregate amount of those differences in value.

(3) If the aggregate amount is a positive amount, the participant is charged to corporation tax under Case VI of Schedule D on that aggregate amount for that accounting period.

(4) If the aggregate amount is a negative amount, the participant is treated as if a loss of that aggregate amount had been incurred by the participant in a transaction in respect of which the participant were within the charge to corporation tax under Case VI of Schedule D.

Further provisionsU.K.

59.—(1) In this Chapter “disposal” is to be construed in accordance with TCGA 1992, and cognate expressions are to be construed accordingly.

(2) The provisions of TCGA 1992 that apply to determine—

(a)the time at which a disposal and acquisition is made, and

(b)how assets disposed of are to be identified,

apply for the purposes of this Chapter in the same way as they apply for the purposes of that Act.

The first measuring dateU.K.

The general ruleU.K.

60.—(1) The general rule is that on the first date on which a participant who is within the charge to tax under this Chapter owns a substantial QIS holding in a qualified investor scheme, the participant must value his own holding in that scheme as at that date.

(2) The general rule is modified if any of the following regulations apply—

(a)regulation 61 (cases affected by the coming into force of these Regulations);

(b)regulation 62 (cases involving the launch of qualified investor schemes);

(c)regulation 63 (cases where a participant's holding becomes substantial).

Cases affected by the coming into force of these RegulationsU.K.

61.—(1) This regulation applies if—

(a)a participant chargeable to income tax owns a substantial QIS holding in a qualified investor scheme on 6th April 2006, or

(b)a participant chargeable to corporation tax owns a substantial QIS holding in a qualified investor scheme on 1st April 2006.

(2) If on the measuring date first occurring after 30th June 2006 the participant does not own a substantial QIS holding in the qualified investor scheme, the participant is not required to value his own holding in that scheme as at 1st or 6th April 2006 (as the case may be).

(3) If on the measuring date first occurring after 30th June 2006 the participant owns a substantial QIS holding in the qualified investor scheme and is chargeable to income tax, the participant must value his own holding in that scheme as at 6th April 2006.

(4) If on the measuring date first occurring after 30th June 2006 the participant owns a substantial QIS holding in the qualified investor scheme and is chargeable to corporation tax, the participant must value its own holding in that scheme as at 1st April 2006.

Cases involving the launch of qualified investor schemesU.K.

62.—(1) This regulation applies if a qualified investor scheme is launched.

(2) If on the date immediately following the expiry of a period of twelve months beginning with the date of issue of the first prospectus of the scheme (“the qualification date”) the participant does not own a substantial QIS holding in the qualified investor scheme, the participant is not required to value his own holding in that scheme as at that date or any earlier date.

(3) If on the qualification date the participant owns a substantial QIS holding in the qualified investor scheme, the participant must value his own holding in that scheme as at the date on which the participant first owned a substantial QIS holding in the scheme.

Cases where a participant's holding becomes substantialU.K.

63.—(1) This regulation applies if, on any date, a participant owns a substantial QIS holding in a qualified investor scheme otherwise than as a result of the acquisition of units in that scheme.

(2) If on the next reporting date and the reporting date following it (“the second reporting date”) the participant does not own a substantial QIS holding in the qualified investor scheme, the participant—

(a)is not required to value his own holding in that scheme at any time, and

(b)is not treated as owning a substantial QIS holding in the scheme on the second reporting date or at any earlier time.

(3) If on the second reporting date the participant owns a substantial QIS holding in the qualified investor scheme, the participant must value his own holding in that scheme as at the date mentioned in paragraph (1) and as at each subsequent measuring date.

Definition of the “first measuring date”U.K.

64.  In this Chapter the “first measuring date” means the date on which, in accordance with regulation 60(1), 61(3) or (4), 62(3) or 63(3), the participant must value his own holding in the qualified investor scheme.

Calculation to be made on the first measuring dateU.K.

65.  On the first measuring date the participant must calculate the chargeable gain or loss that would have accrued for the purposes of tax in respect of chargeable gains if, on that date, the participant had disposed of the substantial QIS holding for a consideration equal to its market value at that time.

Disposals of holdingsU.K.

Reorganisations etc.U.K.

66.—(1) For the purposes of this Chapter, sections 116(10) and 127 of TCGA 1992 (reorganisations) do not apply to a substantial QIS holding in a qualified investor scheme; and a transaction which would otherwise have fallen within either of those provisions is treated as involving a disposal and subsequent acquisition of that holding.

(2) The consideration for the subsequent acquisition is a consideration equal to the market value of the holding immediately before the acquisition.

Disposal of part of a substantial QIS holdingU.K.

67.—(1) This regulation applies if a participant disposes of part of a substantial QIS holding.

(2) The date on which the participant disposes of the part of the substantial QIS holding is a chargeable measuring date.

(3) For the purposes of tax in respect of chargeable gains a corresponding part of the chargeable gain or loss specified in regulation 65 is treated as accruing on the disposal.

(4) Subject to paragraph (3) and for the purposes of tax in respect of chargeable gains, the participant is treated as making the disposal for a consideration of such amount as would secure that neither a gain nor a loss would accrue to the participant.

(5) For the purposes of tax in respect of chargeable gains, this regulation does not affect the treatment of the other party to the transaction involving the part of the substantial QIS holding of which there has been a disposal.

(6) This regulation is subject to regulation 69 (no gain/no loss disposals).

Disposal of the whole of a substantial QIS holdingU.K.

68.—(1) This regulation applies if a participant disposes of the whole of a substantial QIS holding.

(2) The date on which the participant disposes of the substantial QIS holding is a chargeable measuring date.

(3) For the purposes of tax in respect of chargeable gains—

(a)in a case where regulation 67 has applied on any earlier disposal of part of the substantial QIS holding, the remaining part of the chargeable gain or loss specified in regulation 65 is treated as accruing on the disposal, and

(b)in any other case, the whole of the chargeable gain or loss specified in regulation 65 is treated as accruing on the disposal.

(4) Subject to paragraph (3) and for the purposes of tax in respect of chargeable gains, the participant is treated as making the disposal for a consideration of such amount as would secure that neither a gain nor a loss would accrue to the participant.

(5) For the purposes of tax in respect of chargeable gains, this regulation does not affect the treatment of the other party to the transaction involving the substantial QIS holding.

(6) This regulation is subject to regulation 69 (no gain/no loss disposals).

No gain/no loss disposalsU.K.

69.—(1) This regulation applies if, for the purposes of tax in respect of chargeable gains, any disposal of the whole or part of a substantial QIS holding falls within any of the following provisions of TCGA 1992—

(a)section 58(1) (transfers between spouses);

(b)section 62(4) (acquisition as legatee);

(c)section 139 (company reconstructions) M12;

(d)section 140A (transfers of a UK trade) M13;

(e)section 140E (merger leaving assets within the UK tax charge) M14;

(f)section 171(1) (transfers within a group) M15.

(2) Regulation 67(3) or 68(3) (as the case may be) does not apply in relation to the disposal.

(3) On and after the date of the transfer, the transferee's holding in the qualified investor scheme is a substantial QIS holding in that scheme (whether or not the transferee's holding in that scheme (if any) was a substantial QIS holding in that scheme before that date).

(4) If the transferee disposes of the whole, or part, of the substantial QIS holding, the held-over gain or, as the case may be, a corresponding part of the held-over gain, is treated as accruing to the transferee on the disposal.

(5) In paragraph (4) “the held-over gain” means the chargeable gain or loss that would have accrued to the transferor if the disposal falling within paragraph (1) had been a disposal to which regulation 68(3) had applied.