The Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2010

• Citation: S.I. 2010/1642
• Sections: 8

Section 1 Citation, commencement and effect

(1) These Regulations may be cited as the Authorised Investment Funds (Tax) (Amendment No. 2) Regulations 2010 and come into force at 1.45 p.m. on 22nd June 2010.

(2) These Regulations have effect in relation to distributions made at or after that time.

Section 2 Amendments to the Authorised Investment Funds (Tax) Regulations 2006

The Authorised Investment Funds (Tax) Regulations 2006 are amended as follows.

Section 3 Amendment of regulation 13 (treatment of interest distributions for purposes of loan relationships)

In regulation 13 (treatment of interest distributions for purposes of loan relationships) after paragraph (1) insert—

(1A) But paragraph (1) does not apply to the extent that the interest distribution is derived from franked investment income.

Section 4 Amendment of regulation 48 (general)

(1) Amend regulation 48 (general) as follows.

(2) In paragraph (2)(b) for “income tax at the basic rate” substitute “tax at a rate equal to the basic rate of income tax”.

(3) After paragraph (2B) insert—

(2C) Regulation 48A makes provision in relation to the unfranked part of the dividend distribution treated as an annual payment under paragraph (2)(a) and regulation 48B makes provision in relation to the tax treated as deducted under paragraph (2)(b).

Section 5 Insertion of regulations 48A and 48B

After regulation 48 insert—

Income treated as an annual payment treated as foreign income

(48A) If there is a foreign element of the tax treated as deducted under regulation 48(2)(b) (see regulation 48B), a corresponding proportionate part of the distribution which is treated as an annual payment under regulation 48(2)(a) is treated as if it were income that—

(a) arises in a territory of the kind mentioned in regulation 48B(3)(a), and

(b) is income by reference to which the tax treated under that provision as payable was computed.

Tax treated as deducted from a dividend distribution

(48B)

(1) The tax treated as deducted under regulation 48(2)(b) (“the deemed deduction”) is treated as income tax.

(2) But paragraph (1) does not apply to any foreign element of the deemed deduction.

(3) Instead, for the purposes of the Tax Acts the foreign element of the deemed deduction is treated as if it were tax—

(a) payable under the law of a territory outside the United Kingdom with which there are not in force any arrangements under section 2(1) of TIOPA 2010 (double taxation relief by agreement),

(b) calculated by reference to income arising or any chargeable gain accruing, in the territory, and

(c) corresponding to United Kingdom corporation tax.

(4) The amount of the foreign element of the deemed deduction is the amount, if any, by which the participant’s portion of the legal owner’s liability to corporation tax in respect of the gross income is reduced by any relief which is given, or falls to be given by way of a credit under section 18 of TIOPA 2010 (entitlement to credit for foreign tax reduces UK tax by amount of the credit).

(5) For the purposes of paragraph (4) 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.

Section 6 Omission of regulation 52 (repayments of tax)

Omit regulation 52 (repayments of tax).

Section 7 Omission of regulation 52A (companies carrying on general insurance business: treatment of certain amounts of tax as foreign tax)

Omit regulation 52A (companies carrying on general insurance business: treatment of certain amounts of tax as foreign tax) .

Section 8 Amendment of the Schedule (abbreviations and defined expressions)

In the Schedule (abbreviations and defined expressions) in Part 1 (abbreviations of Acts) at the end insert—