HMRC has published draft guidance, for comment, for inclusion in a new authorised contractual scheme (ACS) manual. The guidance does not cover SDLT and capital allowances and HMRC warns that the guidance on CGT may be amended.
An ACS has no legal personality. It is a collective investment scheme which pools assets held and managed on behalf of a number of investors who are the co-owners of the assets. An ACS may be a co-ownership fund or a limited partnership fund.
An ACS is transparent for tax purposes. Each participant is responsible for tax arising on their own share of income and gains at their own rates of tax. The guidance therefore notes that each participant will require full access to information about the assets held and the participant’s share of income (and gains) received by the scheme in order to meets their own tax obligations.
Any income received by investors in a co-ownership fund will be subject to the normal tax treatment applied to that type of income in the hands of that investor.
For example, dividend income is likely to be non-taxable in the hands of a corporate investor. Similarly, where a scheme holds loan assets, a corporate investor in the scheme will stand in the position of creditor in respect of the loans and so will be within the scope of the loan relationships regime.
Investors are subject to tax on capital gains made on their interest in the fund, and not on movements in the underlying assets held in the fund. This means that a gain or loss does not arise when the fund disposes of assets within the fund. Instead, participants may be liable to CGT when they dispose of their interest in the fund.
As with co-ownership funds, participants in a limited partnership fund are taxable on their share of the fund’s income. Unlike co-owership funds, gains made on assets held within the fund are treated as arising directly to participants. Finally, an ACS is exempt from VAT on the costs of management.
HMRC has published draft guidance, for comment, for inclusion in a new authorised contractual scheme (ACS) manual. The guidance does not cover SDLT and capital allowances and HMRC warns that the guidance on CGT may be amended.
An ACS has no legal personality. It is a collective investment scheme which pools assets held and managed on behalf of a number of investors who are the co-owners of the assets. An ACS may be a co-ownership fund or a limited partnership fund.
An ACS is transparent for tax purposes. Each participant is responsible for tax arising on their own share of income and gains at their own rates of tax. The guidance therefore notes that each participant will require full access to information about the assets held and the participant’s share of income (and gains) received by the scheme in order to meets their own tax obligations.
Any income received by investors in a co-ownership fund will be subject to the normal tax treatment applied to that type of income in the hands of that investor.
For example, dividend income is likely to be non-taxable in the hands of a corporate investor. Similarly, where a scheme holds loan assets, a corporate investor in the scheme will stand in the position of creditor in respect of the loans and so will be within the scope of the loan relationships regime.
Investors are subject to tax on capital gains made on their interest in the fund, and not on movements in the underlying assets held in the fund. This means that a gain or loss does not arise when the fund disposes of assets within the fund. Instead, participants may be liable to CGT when they dispose of their interest in the fund.
As with co-ownership funds, participants in a limited partnership fund are taxable on their share of the fund’s income. Unlike co-owership funds, gains made on assets held within the fund are treated as arising directly to participants. Finally, an ACS is exempt from VAT on the costs of management.
