Taxes Consolidation Act 1997 section 738

Undertakings for collective investment

Section 738 sets out the tax regime for domestic undertakings for collective investment, under which the undertaking itself is liable to tax on its income and gains at a flat rate, with unitholders generally not taxed on distributions they receive.

• An undertaking for collective investment includes authorised unit trust schemes, UCITS authorised under the 1989 Regulations, and authorised investment companies designated to raise capital from the public, but excludes special investment schemes, unit trusts wholly owned by pension funds or charities, specified collective investment undertakings, and offshore funds.
• Corporate undertakings are subject to corporation tax at 30% on their profits (from 8 February 2012), while non-corporate undertakings pay income tax and capital gains tax at 30% on income and gains paid to, or accumulated for, unitholders, with a 20% rate applying for the period 1 January to 7 February 2012.
• Assets held by the undertaking are deemed to be disposed of and reacquired at market value on the last day of each chargeable period, with the resulting net gain or loss spread over seven years at one-seventh per year, and indexation relief is not available.
• Unitholders are not entitled to any credit or repayment of tax paid by the undertaking, and transitional provisions allowed designated and guaranteed undertakings to defer the start date of the regime from 6 April 1994 to 6 April 1998.