PART 27

Unit Trusts and Offshore Funds

CHAPTER 1

Unit trusts

731. —(1) In this section, “capital distribution” means any distribution from a unit trust, including a distribution in the course of terminating the unit trust, in money or money's worth except a distribution which in the hands of the recipient constitutes income for the purposes of income tax.

(2) For the purposes of the Capital Gains Tax Acts and without prejudice to section 567 and sections 574 to 578 , chargeable gains accruing to a unit trust in any year of assessment shall be assessed and charged on the trustees of the unit trust.

(3) The trustees of a unit trust shall for the purposes of the Capital Gains Tax Acts be treated as being a single and continuing body of persons (distinct from the persons who may from time to time be the trustees), and that body shall be treated as being resident and ordinarily resident in the State unless the general administration of the unit trust is ordinarily carried on outside the State and the trustees or a majority of them for the time being are not resident or not ordinarily resident in the State.

(4) Where a person receives or becomes entitled to receive in respect of units in a unit trust any capital distribution from the unit trust, such person shall be treated as having in consideration of that capital distribution disposed of an interest in the units.

(5) (a) Where throughout a year of assessment all the issued units in a unit trust are assets such that if those units were disposed of by the unit holder any gain accruing would be wholly exempt from capital gains tax (otherwise than by reason of residence or by virtue of section 739 (3)), gains accruing to the unit trust in that year shall not be chargeable gains.

(b) For the purposes of any assessment to capital gains tax, paragraph (a) shall not apply as respects a unit trust to which subsection (6) applies.

(6) Gains accruing on the disposal of units in a unit trust shall not be chargeable gains for the purposes of the Capital Gains Tax Acts where—

(a) the trustees of the unit trust have at all times (but not taking into account any time before the 6th day of April, 1974) been resident and ordinarily resident in the State, and

(b) the unit trust is a scheme which is established for the purpose or has the effect, solely or mainly, of providing facilities for the participation by the public as beneficiaries under a trust in profits or income arising from the acquisition, holding, management or disposal of securities or any other property whatever and which is administered by the holder of a licence under the Insurance Act, 1936, and for participation in which, in respect of units first issued after the 14th day of June, 1973, a policy of assurance on human life is required to be effected (but so that the units do not become the property of the owner of the policy either as benefits or otherwise).

(7) (a) Subject to paragraph (b), where there is a disposal in any year of assessment of units in a unit trust—

(i) not being an undertaking for collective investment (within the meaning of section 738 ) which began carrying on business on or after the 25th day of May, 1993,

(ii) all the assets of which were throughout the year of assessment 1993-94 assets, whether mentioned in section 19 of the Capital Gains Tax Act, 1975 , or in any other provision of the Capital Gains Tax Acts, to which that section applied, and

(iii) the person disposing of the units acquired the units before the 6th day of April, 1994, then, the chargeable gain on the disposal shall be computed as if the units had been sold and immediately reacquired by that person on the 5th day of April, 1994, at their market value at that date.

(b) Paragraph (a) shall not apply in relation to the disposal of units—

(i) if as a consequence of the application of that paragraph a gain would accrue on that disposal to the person making the disposal and either a smaller gain or a loss would so accrue if that paragraph did not apply, or

(ii) if as a consequence of the application of that paragraph a loss would so accrue and either a smaller loss or a gain would accrue if that paragraph did not apply,

and accordingly in a case to which subparagraph (i) or (ii) applies, the amount of the gain or loss accruing on the disposal shall be computed without regard to this subsection (other than this paragraph) but, in a case where this paragraph would otherwise substitute a loss for a gain or a gain for a loss, it shall be assumed in relation to the disposal that the units were acquired by the person disposing of them for a consideration such that neither a gain nor a loss accrued to that person on making the disposal.

732. —(1) In this section—

“securities” includes securities within section 607 and stocks, shares, bonds and obligations of any government, municipal corporation, company or other body corporate;

“quoted securities” means securities which, at any time at which they are to be taken into account for the purposes of this section, or at any time in the period of 6 years immediately before such time, have or have had quoted market values on a stock exchange in the State or elsewhere.

(2) This section shall apply—

(a) to a unit trust (in this section referred to as a “qualifying unit trust”)—

(i) which is a registered unit trust scheme (within the meaning of section 3 of the Unit Trusts Act, 1972 ),

(ii) the trustees of which are resident and ordinarily resident in the State,

(iii) the prices of units in which are published regularly by the managers,

(iv) all the units in which are of equal value and carry the same rights, and

(v) which, at all times since it was registered in the register established under the Unit Trusts Act, 1972, but subject to subsection (7), satisfied the conditions specified in subsection (6), and

(b) to disposals of assets which are units in a qualifying unit trust (in this section referred to as “qualifying units”).

(3) Chargeable gains accruing to a qualifying unit trust in any year of assessment shall be chargeable to capital gains tax at one-half of the rate specified in section 28 (3).

(4) Chargeable gains which derive from the disposal of qualifying units and accrue to a person chargeable to capital gains tax shall be chargeable to tax at one-half of the rate at which those gains would be chargeable under the Capital Gains Tax Acts apart from this subsection.

(5) For any accounting period of a company, being an accounting period for which the company is chargeable to corporation tax in respect of chargeable gains—

(a) where the total amount of chargeable gains accruing to the company for the accounting period derives from the disposal of qualifying units, the amount which apart from this section would be included in respect of chargeable gains in the company's total profits for the accounting period under section 78 (1) shall be reduced by 50 per cent,

(b) where the total amount of chargeable gains accruing to the company for the accounting period includes—

(i) an amount in respect of such chargeable gains on the disposal of qualifying units, and

(ii) an amount in respect of such chargeable gains on the disposal of assets other than qualifying units,

the amount which apart from this section would be included in respect of chargeable gains in the company's total profits for the accounting period under section 78 (1) shall be reduced by such amount as bears to the amount to be so included the same proportion as one-half of the amount referred to in subparagraph (i) bears to the total of the amounts referred to in subparagraphs (i) and (ii).

(6) The conditions referred to in subsection (2)(a)(v) are that—

(a) not less than 80 per cent of the units were held by persons who acquired them pursuant to an offer made to the general public,

(b) the number of unit holders was not less than 50 and no one unit holder was the beneficial owner of more than 5 per cent of the units in issue at any time, and for the purposes of this paragraph a person and any persons with whom such person is connected shall be treated as one unit holder,

(c) the value of quoted securities held by the trustees on behalf of the unit trust was not less than 80 per cent by value of the assets so held by the trustees, and

(d) the securities held by the trustees on behalf of the unit trust in any one company did not exceed 15 per cent by value of the total securities so held by the trustees.

(7) The Revenue Commissioners may treat a unit trust as a qualifying unit trust for the purposes of this section notwithstanding that one or more of the conditions specified in subsection (6) was or were not complied with in relation to the unit trust—

(a) for the period ending on the 5th day of April, 1978, in the case where the unit trust became registered in the register established under the Unit Trusts Act, 1972, before the 6th day of April, 1976, and

(b) for the period ending on a date not more than 2 years after the date on which the unit trust became registered in that register, in the case where the unit trust became so registered on or after the 6th day of April, 1976.

733. —(1) In this section, references to a reorganisation of units in a trust scheme include—

(a) any case where persons are, whether for payment or not, allotted units in the scheme in respect of and in proportion to (or as nearly as may be in proportion to) their holdings of units in the scheme or of any class of units in the scheme, and

(b) any case where there is more than one class of units and the rights attached to units of any class are altered.

(2) (a) Subject to paragraph (b), section 584 shall apply with any necessary modification in relation to a reorganisation or reduction of units in any unit trust scheme registered under the Unit Trusts Act, 1972, or authorised under the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 1989 (S.I. No. 78 of 1989), as if (except as respects subsection (7) of that section)—

(i) that scheme were a company, and

(ii) the units in that scheme were shares in the company.

(b) Where but for this paragraph this section would apply to any reorganisation or reduction of units in a unit trust scheme in a year of assessment so that units which are deemed not to be chargeable assets for that year for the purposes of the Capital Gains Tax Acts would be treated as “original shares” or a “new holding” within the meaning of section 584 , that section shall not apply to that reorganisation or reduction of units in the unit trust scheme.

(3) The references in subsection (2) to section 584 do not include references to that section as applied by section 585 or 586 .

734. —(1) (a) In this section and in Schedule 18 —

“accounting period”, in relation to a collective investment undertaking, means the chargeable period or its basis period (within the meaning of section 321 (2)) on the income or profits of which the undertaking is chargeable to income tax or corporation tax, as the case may be, for any chargeable period (within the meaning of that section), or would be so chargeable but for an insufficiency of income or profits, and—

(i) where 2 basis periods overlap, the period common to both shall be deemed to fall in the first basis period only,

(ii) where there is an interval between the end of the basis period for one chargeable period and the basis period for the next chargeable period, the interval shall be deemed to be part of the second basis period, and

(iii) the reference in paragraph (i) to the overlapping of 2 periods shall be construed as including a reference to the coincidence of 2 periods or to the inclusion of one period in another, and the reference to the period common to both shall be construed accordingly;

“the Acts” means the Tax Acts and the Capital Gains Tax Acts;

“the airport” has the same meaning as in the Customs-Free Airport Act, 1947;

“appropriate tax”, in relation to the amount of any relevant payment made by a collective investment undertaking or in relation to any amount of undistributed relevant income of such an undertaking, as the case may be, means a sum representing tax on the amount of the payment or the amount of the undistributed relevant income, as appropriate, at a rate equal to the standard rate of income tax in force at the time of the payment or at the end of the accounting period to which the undistributed relevant income relates, as the case may be, after making a deduction from that sum of an amount equal to, or to the aggregate of—

(i) in the case of a relevant payment—

(I) in so far as it is made wholly or partly out of relevant income which at a previous date had been or formed part of the undistributed relevant income of the undertaking, the amount of any appropriate tax deducted—

(A) from the relevant income, or

(B) where the payment, or that part of the payment which is made out of relevant income, is less than the relevant income, from such part of the relevant income as is represented by the payment, or that part of the payment, as the case may be, and

(II) any other amount or amounts of tax deducted—

(A) from the relevant profits out of which the relevant payment is made, or

(B) where the payment is less than the profits, from such part of the profits as is represented by the payment,

under any of the provisions of the Acts apart from this section and which is or are not repayable to the collective investment undertaking,

or

(ii) in the case of an amount of undistributed relevant income, any amount or amounts of tax deducted from the income under any of the provisions of the Acts apart from this section and which is or are not repayable to the collective investment undertaking,

but the amount of the deduction shall not exceed the amount of the sum;

“the Area” has the same meaning as it has for the purposes of section 446 ;

“chargeable gain” has the same meaning as in the Capital Gains Tax Acts;

“collective investor”, in relation to an authorised investment company (within the meaning of Part XIII of the Companies Act, 1990), means an investor, being a life assurance company, pension fund or other investor—

(i) who invests in securities or any other property whatever with moneys contributed by 50 or more persons—

(I) none of whom has at any time directly or indirectly contributed more than 5 per cent of such moneys, and

(II) each of a majority of whom has contributed moneys to the investor with the intention of being entitled, otherwise than on the death of any person or by reference to a risk of any kind to any person or property, to receive from the investor—

(A) a payment which, or

(B) payments the aggregate of which,

exceeds those moneys by a part of the profits or income arising to the investor,

and

(ii) who invests in the authorised investment company primarily for the benefit of those persons;

“collective investment undertaking” means, subject to paragraph (b)—

(i) a unit trust scheme which is or is deemed to be an authorised unit trust scheme (within the meaning of the Unit Trusts Act, 1990) and which has not had its authorisation under that Act revoked,

(ii) any other undertaking which is an undertaking for collective investment in transferable securities within the meaning of the relevant Regulations, being an undertaking which holds an authorisation, which has not been revoked, issued pursuant to the relevant Regulations,

(iii) a limited partnership which—

(I) has as its principal business, as expressed in the partnership agreement establishing the limited partnership, the investment of its funds in property, and

(II) has been authorised to carry on that business, under any enactment which provides for such authorisation, by the Central Bank of Ireland,

and where, in addition to being a collective investment undertaking, it is also a specified collective investment undertaking, and

(iv) any authorised investment company (within the meaning of Part XIII of the Companies Act, 1990)—

(I) which has not had its authorisation under that Part of that Act revoked, and

(II) (A) which has been designated in that authorisation as an investment company which may raise capital by promoting the sale of its shares to the public and has not ceased to be so designated, or

(B) (aa) which is not a qualified company,

(bb) which in addition to being a collective investment undertaking is also a specified collective investment undertaking, and

(cc) where all the holders of units who must be resident outside the State, for the company to be a specified collective investment undertaking, are collective investors;

“distribution” has the same meaning as in the Corporation Tax Acts;

“qualified company” has, in relation to any business of a collective investment undertaking carried on in—

(i) the airport, the same meaning as it has for the purposes of section 445 , or

(ii) the Area, the same meaning as it has for the purposes of section 446 ;

“qualifying management company”, in relation to a collective investment undertaking, means a qualified company which in the course of relevant trading operations carried on by the qualified company manages the whole or any part of the investments and other activities of the business of the undertaking;

“relevant gains”, in relation to a collective investment undertaking, means gains accruing to the undertaking, being gains which would constitute chargeable gains in the hands of a person resident in the State;

“relevant income”, in relation to a collective investment undertaking, means any amounts of income, profits or gains which arise to or are receivable by the collective investment undertaking, being amounts of income, profits or gains—

(i) which are or are to be paid to unit holders as relevant payments,

(ii) out of which relevant payments are or are to be made to unit holders, or

(iii) which are or are to be accumulated for the benefit of, or invested in transferable securities for the benefit of, unit holders,

and which if they arose to an individual resident in the State would in the hands of the individual constitute income for the purposes of income tax;

“relevant payment” means a payment made to a unit holder by a collective investment undertaking by reason of rights conferred on the unit holder as a result of holding a unit or units in the collective investment undertaking, other than a payment made in respect of the cancellation, redemption or repurchase of a unit;

“relevant profits”, in relation to a collective investment undertaking, means the relevant income and relevant gains of the undertaking;

“relevant Regulations” means the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 1989 (S.I. No. 78 of 1989);

“relevant trading operations” has, in relation to any business of a collective investment undertaking carried on by a qualified company in—

(i) the airport, the same meaning as it has for the purposes of section 445 , or

(ii) the Area, the same meaning as it has for the purposes of section 446 ;

“return” means a return under paragraph 1(2) of Schedule 18 ;

“specified collective investment undertaking” means, subject to paragraph (c), a collective investment undertaking—

(i) most of the business of which, to the extent that it is carried on in the State—

(I) (A) is carried on in the Area by the undertaking or by a qualifying management company of the undertaking or by the undertaking and the qualifying management company of the undertaking, or

(B) is not so carried on in the Area but—

(aa) is so carried on in the State,

(bb) would be so carried on in the Area but for circumstances outside the control of the person or persons carrying on the business, and

(cc) is so carried on in the Area when those circumstances cease to exist,

or

(II) is carried on in the airport by the undertaking or by a qualifying management company of the undertaking or by the undertaking and the qualifying management company of the undertaking,

and

(ii) in which, except to the extent that such units are held by the undertaking itself, the qualifying management company of the undertaking, a company referred to in section 710 (2), a specified company or another specified collective investment undertaking, all the holders of units in the undertaking are persons resident outside the State,

and includes any company limited by shares or guarantee which—

(iii) is wholly owned by such a collective investment undertaking or its trustees, if any, for the benefit of the holders of units in that undertaking,

(iv) is so owned solely for the purpose of limiting the liability of that undertaking or its trustees, as the case may be, in respect of futures contracts, options contracts or other financial instruments with similar risk characteristics, by enabling it or its trustees, as the case may be, to invest or deal in such investments through the company, and

(v) would, if references to an undertaking in paragraph (i) were to be construed as including references to a company limited by shares or guarantee, satisfy the condition set out in paragraph (i);

“specified company” means a company—

(i) which is—

(I) a qualified company carrying on relevant trading operations (within the meaning of section 446 ), or

(II) a qualified company carrying on relevant trading operations (within the meaning of section 445 ) so long as those relevant trading operations could be certified by the Minister for Finance as relevant trading operations for the purposes of section 446 if they were carried on in the Area rather than in the airport,

and

(ii) not more than 25 per cent of the share capital of which is owned directly or indirectly by persons resident in the State;

“tax” means income tax, corporation tax or capital gains tax, as may be appropriate;

“transferable securities” has the same meaning as in the relevant Regulations; “undistributed relevant income”, in relation to a collective investment undertaking, means any relevant income arising to or receivable by the undertaking in an accounting period of the undertaking and which at the end of the accounting period has not been paid to the unit holders and from which appropriate tax has not previously been deducted;

“unit” includes any investment, such as a subscription for shares or a contribution of capital, in a collective investment undertaking, being an investment which entitles the investor—

(i) to a share of the investments or relevant profits of, or

(ii) to receive a distribution from,

the collective investment undertaking;

“unit holder”, in relation to a collective investment undertaking, means any person who by reason of the holding of a unit, or under the terms of a unit, in the undertaking is entitled to a share of any of the investments or relevant profits of, or to receive a distribution from, the undertaking.

(b) References in this section to a collective investment undertaking, apart from such references in the definition of “specified collective investment undertaking”, shall include references to a company limited by shares or guarantee which is a specified collective investment undertaking.

(c) For the purposes of the definition of “specified collective investment undertaking”, a reference to a qualifying management company shall be construed as if—

(i) in section 445 (2) there were deleted “, and any certificate so given shall, unless it is revoked under subsection (4), (5) or (6), remain in force until the 31st day of December, 2005”, and

(ii) in section 446 (2) there were deleted “, and any certificate so given shall, unless it is revoked under subsection (4), (5) or (6), remain in force until the 31st day of December, 2005”.

(2) For the purposes of this section—

(a) Where any payment is made out of relevant profits or out of any part of such profits from which any tax including appropriate tax has been deducted and the payment is less than the relevant profits or that part of such profits, the amount of the tax so deducted which is referable to the part of the profits represented by the payment shall be the amount which bears to the total amount of the tax deducted from the relevant profits or the part of such profits, the same proportion as the amount of the payment bears to the amount of the relevant profits or the part of such profits, as the case may be, and

(b) any reference in this section to the amount of a relevant payment shall be construed as a reference to the amount which would be the amount of the relevant payment if the appropriate tax were not to be deducted from the relevant payment or from any undistributed relevant income out of which the relevant payment or any part of such payment is made.

(3) Notwithstanding anything in the Acts but subject to subsection (5), a collective investment undertaking shall not be chargeable to tax in respect of relevant profits, but the relevant profits shall be chargeable to tax in the hands of any unit holder, including the undertaking, to whom a relevant payment of or out of the relevant profits is made if and to the extent that the unit holder would be chargeable to tax in the State on such relevant profits, or on such part of the relevant profits as is represented by the payment, on the basis that and in all respects as if, subject to subsections (4) and (6), the relevant profits or that part of the relevant profits had arisen or accrued to the unit holder without passing through the hands of the undertaking.

(4) Where in accordance with subsection (3) a unit holder is to be charged to tax on a relevant payment made by a collective investment undertaking which is not a specified collective investment undertaking—

(a) in so far as any amount of the relevant payment on which the unit holder is to be so charged is or is made out of relevant income, the unit holder shall be charged to tax on that amount under Case IV of Schedule D as if it were an amount of income arising to the unit holder at the time the payment is made, and

(b) in so far as any amount of the relevant payment on which the unit holder is to be so charged is or is made out of relevant gains, it shall be treated as a capital distribution within the meaning of section 731 and, if it is not already the case, the Capital Gains Tax Acts shall apply in all respects as if the amount of the relevant payment were a capital distribution made by a unit trust and the unit or units in respect of which it is paid were a unit or units in a unit trust.

(5) (a) Where a collective investment undertaking which is not a specified collective investment undertaking—

(i) makes a relevant payment of or out of relevant profits to a unit holder resident in the State, or

(ii) has at the end of an accounting period of the undertaking any undistributed relevant income,

it shall deduct out of the amount of the relevant payment or the amount of the undistributed relevant income, as the case may be, the appropriate tax.

(b) Where appropriate tax is deducted in accordance with paragraph (a)—

(i) the unit holder to whom the relevant payment is made or the unit holder or unit holders entitled to the relevant income, as the case may be, shall allow the deduction, and

(ii) the collective investment undertaking shall, on the making of the relevant payment to the unit holder or on the making of any relevant payment out of the undistributed relevant income to any unit holder, as the case may be, be acquitted and discharged of so much money as is represented—

(I) by the deduction, or

(II) where the relevant payment is less than the amount of the undistributed relevant income, by so much of the deduction as is referable to the relevant payment,

as if the amount of money had actually been paid to the unit holder.

(c) Schedule 18 shall apply for the purposes of supplementing this subsection.

(6) (a) Where a unit holder receives a relevant payment from a collective investment undertaking which is not a specified collective investment undertaking and appropriate tax has been deducted from the payment, or from the relevant profits or part of those profits out of which the payment is made, then, the unit holder shall—

(i) if the unit holder is not resident in the State for tax purposes at the time the payment is made, be entitled, on due claim and on proof of the facts, to repayment of the appropriate tax, or so much of it as is referable to the relevant payment, as the case may be, or

(ii) in any other case, be entitled—

(I) to have the unit holder's liability to tax under any assessment made in respect of the relevant payment or any part of the relevant payment reduced by a sum equal to so much, if any, of the appropriate tax as is referable to the amount of the relevant payment contained in the assessment, and

(II) where the appropriate tax so referable exceeds the unit holder's liability to tax in respect of the relevant payment, or in respect of that part of the relevant payment contained in the assessment, to repayment of the excess.

(b) For the purposes of paragraph (a)(ii), the inspector or on appeal the Appeal Commissioners shall make such apportionment of the appropriate tax deducted from a relevant payment, or from the relevant profits out of which the relevant payment or any part of the relevant payment is made, as is just and reasonable to determine the amount of the appropriate tax, if any, referable to any part of the relevant payment contained in an assessment.

(7) Section 732 shall not apply as on and from—

(a) the 24th day of May, 1989, to—

(i) a qualifying unit trust (within the meaning of section 732 ), and

(ii) the disposal of qualifying units (within the meaning of that section) in such a qualifying unit trust,

where the qualifying unit trust is also a specified collective investment undertaking, and

(b) (i) the 6th day of April, 1990, or

(ii) where this section applies by virtue of subsection (12)(b) on an earlier day to a qualifying unit trust which is a collective investment undertaking, such earlier day in respect of the qualifying unit trust,

to such a qualifying unit trust or to the disposal of such qualifying units in the qualifying unit trust, where the qualifying unit trust is a collective investment undertaking without also being a specified collective investment undertaking.

(8) Section 805 shall not apply to a collective investment undertaking if but for this subsection it would otherwise apply.

(9) As respects any collective investment undertaking which is a company (within the meaning of the Corporation Tax Acts)—

(a) a relevant payment made out of the relevant profits of the undertaking or a payment made in respect of the cancellation, redemption or repurchase of a unit in the undertaking shall not be treated as a distribution for any of the purposes of the Tax Acts, and

(b) if but for this subsection section 440 would otherwise apply, it shall not apply to the collective investment undertaking.

(10) Notwithstanding section 1034 , a person not resident in the State shall not by virtue of that section be assessable and chargeable in the name of an agent in respect of a relevant payment made out of the relevant profits of a collective investment undertaking.

(11) For the purposes of the Tax Acts, a unit holder other than a qualifying management company shall not be treated as carrying on a trade in the State through a branch or agency or otherwise where that unit holder would not be so treated if the unit holder did not hold any units in a specified collective investment undertaking.

(12) This section shall apply as on and from—

(a) in the case of a specified collective investment undertaking, the 24th day of May, 1989, and

(b) in the case of any other collective investment undertaking, the 6th day of April, 1990, or such earlier day, not being earlier than the 6th day of April, 1989, as the Revenue Commissioners may agree to in writing with any such other collective investment undertaking in respect of that undertaking.

735. —(1) This section shall apply to any unit trust scheme (within the meaning of the Unit Trusts Act, 1972 ) where there is or was at any time in respect of any or all units issued after the 14th day of June, 1973, a requirement for participation in that unit trust scheme that a policy of assurance on human life be effected (but without those units becoming the property of the owner of the policy either as benefits or otherwise).

(2) Notwithstanding section 734 , a unit trust scheme to which this section applies shall be deemed not to be a collective investment undertaking for the purposes of that section and Schedule 18 .

736. —(1) Where the trustees of a unit trust scheme (within the meaning the Unit Trusts Act, 1990), which apart from section 735 would be a collective investment undertaking for the purposes of section 734 and Schedule 18 , have not later than the 1st day of November, 1992—

(a) paid the capital gains tax which would have been chargeable on them if—

(i) on the 31st day of March, 1992, they had disposed of all the assets of the unit trust scheme, and

(ii) the resulting chargeable gains were chargeable to tax at one-half of the rate at which they would have been chargeable under the Capital Gains Tax Acts apart from this subparagraph,

and

(b) given notice in writing to the Revenue Commissioners that they have paid that tax in accordance with paragraph (a),

then, notwithstanding section 735 , the unit trust scheme (in this section referred to as “the relevant unit trust”) shall be deemed to be and to have been a collective investment undertaking for the purposes of section 734 and Schedule 18 with effect from the 1st day of April, 1992.

(2) (a) Where units in a relevant unit trust were held by a person on the 31st day of March, 1992, they shall be treated, for the purposes of computing chargeable gains accruing to the person on or after the 1st day of April, 1992, as having been acquired by the person on the 31st day of March, 1992.

(b) Section 731 (6) shall not apply to disposals on or after the 1st day of April, 1992, of units in a relevant unit trust.

(3) Where the consideration received for a disposal, or given for an acquisition, of an asset on the 31st day of March, 1992, is to be determined as a result of this section, it shall be deemed to be an amount equal to the market value of the asset on that day, and for this purpose “market value”, in relation to any asset, shall be construed in accordance with section 548 .

737. —(1) (a) In this section—

“inspector”, “ordinary shares”, and “qualifying shares” have the same meanings respectively as in section 723 ;

“authorised unit trust scheme” means a unit trust scheme which is or is deemed to be an authorised unit trust scheme (within the meaning of the Unit Trusts Act, 1990) and which has not had its authorisation under that Act revoked;

“market value” shall be construed in accordance with section 548 ;

“special investment scheme” means an authorised unit trust scheme in respect of which the conditions specified in subsection (2) are satisfied;

“special investment units” means units sold to an individual on or after the 1st day of February, 1993, by the management company or trustee under an authorised unit trust scheme in respect of which—

(a) the conditions specified in subsection (3) are satisfied, and

(b) a declaration of the kind specified in subsection (4) has been made to the management company or trustee;

“specified qualifying shares”, in relation to a special investment scheme, means qualifying shares in a company which, when the shares are acquired for the scheme, has an issued share capital the market value of which is less than £100,000,000;

“units”, in relation to an authorised unit trust scheme, means any units (whether described as units or otherwise) into which are divided the beneficial interests in the assets subject to any trust created under the scheme.

(b) A reference in this section to the management company or trustee under an authorised unit trust scheme shall be construed as a reference to the person in whom are vested the powers of management relating to property for the time being subject to any trust created pursuant to the scheme or, as the case may be, to the person in whom such property is or may be vested in accordance with the terms of the trust.

(2) (a) The conditions referred to in the definition of “special investment scheme” are as follows:

(i) the beneficial interests in the assets subject to any trust created under the authorised unit trust scheme concerned shall be divided into special investment units;

(ii) the aggregate of the consideration given for shares which are at any time before the 1st day of February, 1994, assets subject to any trust created under the scheme shall not be less than—

(I) as respects qualifying shares, 40 per cent, and

(II) as respects specified qualifying shares, 6 per cent,

of the aggregate of the consideration given for the assets which are at that time subject to any such trust;

(iii) the aggregate of the consideration given for shares which are at any time within the year ending on the 31st day of January, 1995, assets subject to any trust created under the scheme shall not be less than—

(I) as respects qualifying shares, 45 per cent, and

(II) as respects specified qualifying shares, 9 per cent,

of the aggregate of the consideration given for the assets which are at that time subject to any such trust;

(iv) the aggregate of the consideration given for shares which are at any time within the year ending on the 31st day of January, 1996, assets subject to any trust created under the scheme shall not be less than—

(I) as respects qualifying shares, 50 per cent, and

(II) as respects specified qualifying shares, 10 per cent,

of the aggregate of the consideration given for the assets which are at that time subject to any such trust;

(v) the aggregate of the consideration given for shares which are at any time on or after the 1st day of February, 1996, assets subject to any trust created under the scheme shall not be less than—

(I) as respects qualifying shares, 55 per cent, and

(II) as respects specified qualifying shares, 10 per cent,

of the aggregate of the consideration given for the assets which are at that time subject to any such trust.

(b) For the purposes of subparagraphs (ii) to (v) of paragraph (a), the amount of the consideration given for assets subject to any trust created under the scheme shall be determined in accordance with sections 547 and 580 .

(3) (a) The conditions referred to in the definition of “special investment units” are as follows:

(i) the special investment units shall be so designated in the trusts created under the authorised unit trust scheme concerned;

(ii) the aggregate of payments made on or before any day to the management company or trustee under the scheme by or on behalf of an individual in respect of special investment units owned, whether jointly or otherwise, by the individual on that day shall not exceed £50,000;

(iii) the management company or trustee under the scheme shall ensure that the aggregate of the market value of special investment units owned, whether jointly or otherwise, by any individual does not exceed £50,000 at any time on or after the fifth anniversary of the date on which the first payment was made by or on behalf of that individual in respect of those units;

(iv) special investment units shall not be sold to or owned by an individual who is not of full age;

(v) special investment units shall only be sold to an individual—

(I) who shall be beneficially entitled to, and

(II) to whom there shall be paid,

all amounts payable in respect of those units by the management company or trustee under the scheme;

(vi) except in the case of special investment units sold to and owned jointly only by a couple married to each other, units shall not be jointly owned;

(vii) except in the case of special investment units bought by and owned jointly only by a couple married to each other, an individual who owns such units of an authorised unit trust scheme shall not buy or own such units of another authorised unit trust scheme;

(viii) where a couple married to each other buy and jointly own special investment units of an authorised unit trust scheme, they shall not buy or own such units in any other such scheme either individually or jointly, other than units which they buy and jointly own in one other such scheme.

(b) For the purposes of subparagraphs (ii) to (iv) and (vi) to (viii) of paragraph (a), references to ownership of special investment units shall be construed as references to beneficial ownership of the units.

(c) For the purposes of subparagraphs (ii) and (iii) of paragraph (a), a disposal of special investment units of an authorised unit trust scheme acquired by an individual at different times shall be assumed to be a disposal of units acquired later, rather than of units acquired earlier, by the individual.

(4) The declaration referred to in the definition of “special investment units” is a declaration in writing to the management company or trustee under an authorised unit trust scheme which—

(a) (i) is made by the individual (in this section referred to as “the declarer”) to whom any amounts are payable by the management company or trustee in respect of units in respect of which the declaration is made, and

(ii) is signed by the declarer,

(b) is made in such form as may be prescribed or authorised by the Revenue Commissioners,

(c) declares that at the time when the declaration is made the conditions specified in subparagraphs (iv) to (viii) of subsection (3)(a) are satisfied in relation to the units in respect of which the declaration is made,

(d) contains the full name and address of the individual beneficially entitled to any amounts payable in respect of the units in respect of which the declaration is made,

(e) contains an undertaking by the declarer that, if any of the conditions referred to in subparagraphs (iv) to (viii) of subsection (3)(a) ceases to be satisfied in respect of the units in respect of which the declaration is made, the declarer will notify the management company or trustee accordingly, and

(f) contains such other information as the Revenue Commissioners may reasonably require for the purposes of this section.

(5) (a) The management company or trustee under an authorised unit trust scheme shall—

(i) keep and retain for not less than the longer of the following periods—

(I) a period of 6 years, and

(II) a period which, in relation to the units in respect of which the declaration is made, ends 3 years after the earliest date on which all of those units stand cancelled, redeemed or bought by the management company or trustee, and

(ii) on being so required by notice given to it in writing by an inspector, make available to the inspector within the time specified in the notice,

all declarations of the kind specified in subsection (4) which have been made to it.

(b) The inspector may examine and take copies of or of extracts from a declaration made available to him or her under paragraph (a).

(6) (a) Notwithstanding section 734 , a special investment scheme shall not be a collective investment undertaking for the purposes of that section and Schedule 18 ; but a special investment scheme shall continue to be treated as a collective investment undertaking (within the meaning of section 734 ) for the purposes of section 206 (a) of the Finance Act, 1992 .

(b) Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts but subject to paragraphs (c) and (d)—

(i) income tax in respect of income arising to a special investment scheme shall be chargeable at the standard rate, and such income shall not be charged to an additional duty of income tax under section 805 , and

(ii) capital gains tax in respect of chargeable gains accruing to a special investment scheme shall be chargeable at the rate specified in section 28 (3).

(c) Any income tax or capital gains tax chargeable in accordance with paragraph (b) shall be reduced so that the amount of such tax, before it is reduced by any credit, relief or other deduction under the Tax Acts or the Capital Gains Tax Acts apart from this section, is 10 per cent of income arising or chargeable gains accruing, as the case may be, to the scheme.

(d) Only so much of income arising or gains accruing to the scheme shall be chargeable to income tax or capital gains tax, as the case may be, in accordance with paragraph (b) as is or is to be—

(i) paid to, or

(ii) accumulated or invested for the benefit of,

holders of special investment units or as would be so paid, accumulated or invested if any gains accruing to the scheme by virtue of subsection (8) were gains on an actual disposal of the assets concerned.

(7) (a) Notwithstanding section 136 (5), a distribution made by a company resident in the State in respect of shares which are subject to any trust created in pursuance of a special investment scheme shall be treated for the purposes of the Tax Acts as income in respect of which the management company or trustee under the scheme is entitled to a tax credit, and no other person shall be treated for the purposes of section 136 as receiving that distribution.

(b) Where a management company or trustee under a special investment scheme is entitled to a tax credit in respect of a distribution made by a company resident in the State, the credit or part of it shall be set against—

(i) the income tax, as reduced by virtue of subsection (6)(c), chargeable in respect of income arising to, or

(ii) the capital gains tax, as so reduced, chargeable in respect of chargeable gains accruing to,

the special investment scheme for the year of assessment in which the distribution is made and, where the credit exceeds the aggregate of that income tax and capital gains tax, the excess shall be paid to the management company or trustee under the scheme.

(c) Notwithstanding Chapter 4 of Part 8 , that Chapter shall apply to a deposit (within the meaning of that Chapter) for the time being subject to any trust created pursuant to a special investment scheme as if such a deposit were not a relevant deposit (within the meaning of that Chapter).

(8) (a) Notwithstanding the Capital Gains Tax Acts, for the purposes of computing chargeable gains arising to a special investment scheme—

(i) each asset which on the 5th day of April is subject to any trust created pursuant to the scheme shall be deemed to have been disposed of and immediately reacquired by the management company or trustee under the scheme on that day at the asset's market value on that day,

(ii) section 556 shall not apply,

(iii) section 607 shall not apply,

(iv) without prejudice to the treatment of losses on such shares as allowable losses, gains accruing on the disposal or deemed disposal of eligible shares (within the meaning of Part 16 ) in a qualifying company (within the meaning of that Part) shall not be chargeable gains, and

(v) as respects section 581 —

(I) subsections (1) and (2) of that section, and

(II) subsection (3) of that section, in so far as a chargeable gain is not thereby disregarded for the purposes of that subsection,

shall apply as if subparagraphs (i) and (iii) had not been enacted.

(b) Where in a year of assessment the management company or trustee under a special investment scheme incurs allowable losses on disposals or deemed disposals of assets subject to any trust created pursuant to the scheme, the amount, if any, by which the aggregate of such allowable losses exceeds the aggregate of chargeable gains on such disposals in the year of assessment shall be—

(i) disregarded for the purposes of section 31 ,

(ii) treated as reducing the income chargeable to income tax arising to the scheme in that year of assessment, and

(iii) to the extent that it is not treated as reducing income arising to the scheme in that year of assessment, treated for the purposes of the Capital Gains Tax Acts and this paragraph as an allowable loss incurred in the next year of assessment on a disposal of an asset subject to a trust created pursuant to the scheme.

(c) (i) In this paragraph—

“the appropriate amount in respect of the interest” means the appropriate amount in respect of the interest which would be determined in accordance with Schedule 21 if the management company or the trustee was the first buyer and the management company or the trustee carried on a trade to which section 749 (1) applies but, in determining the appropriate amount in respect of the interest in accordance with Schedule 21 , paragraph 3(4) of that Schedule shall apply as if “in the opinion of the Appeal Commissioners” were deleted;

“securities” has the same meaning as in section 815 .

(ii) Where in a year of assessment (in this paragraph referred to as “the first year of assessment”) any securities which are assets subject to any trust created pursuant to a special investment scheme are disposed of and in the following year of assessment interest becoming payable in respect of the securities is receivable by the special investment scheme, then, for the purposes of computing the chargeable gains for the first year of assessment, the price paid by the management company or the trustee for the securities shall be treated as reduced by the appropriate amount in respect of the interest.

(iii) Where for a year of assessment subparagraph (ii) applies so as to reduce the price paid for securities, the amount by which the price paid for the securities is reduced shall be treated as a loss arising in the following year of assessment from the disposal of the securities.

(9) (a) In this subsection, “eligible shares” means eligible shares within the meaning of Part 16 in a qualifying company within the meaning of that Part.

(b) Distributions received by the management company or trustee under a special investment scheme in respect of eligible shares which are subject to any trust created in pursuance of the scheme shall not be chargeable to income tax; but, notwithstanding subsection (7) or section 136 , the tax credit in respect of a distribution to which this paragraph applies shall be disregarded for the purposes of the Tax Acts and the Capital Gains Tax Acts.

(c) Notwithstanding section 508 , the Revenue Commissioners shall not designate a special investment scheme for the purposes of Part 16 .

(10) (a) Any payment made to a holder of special investment units by the management company or trustee under the special investment scheme concerned by reason of rights conferred on the holder as a result of holding such units shall not be reckoned in computing total income for the purposes of the Income Tax Acts.

(b) Section 732 shall not apply to a special investment scheme or the disposal of special investment units.

(c) No chargeable gain shall accrue on the disposal of, or of an interest in, special investment units.

(d) Notwithstanding any other provision of the Income Tax Acts or the Capital Gains Tax Acts, the holder of special investment units of a special investment scheme shall not be entitled to any credit for or payment of any income tax or capital gains tax paid in respect of income arising to, or capital gains accruing to, the scheme.

738. —(1) (a) In this section and in section 739 —

“chargeable period” means an accounting period of an undertaking for collective investment which is a company or, as respects such an undertaking which is not a company, a year of assessment;

“designated assets” means—

(i) land, or

(ii) shares in a company resident in the State which are not shares—

(I) listed in the official list, or

(II) dealt in on the smaller companies market or the unlisted securities market,

of the Irish Stock Exchange;

“designated undertaking for collective investment” means an undertaking for collective investment which, on the 25th day of May, 1993, owned designated assets for which that undertaking gave consideration (determined in accordance with section 547 ) the aggregate of which is not less than 80 per cent of the aggregate of the consideration (as so determined) which that undertaking gave for the total assets it owned at that date;

“distribution” has the same meaning as in the Corporation Tax Acts;

“guaranteed undertaking for collective investment” means an undertaking for collective investment all of the issued units of which, on the 25th day of May, 1993, are units in respect of each of which the undertaking will make one payment only, being a payment—

(i) to be made on a specified date in cancellation of those units, and

(ii) which is the aggregate of—

(I) a fixed amount, and

(II) an amount, which may be nil, determined by a stock exchange index or indices;

“relevant Regulations” means the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 1989 (S.I. No. 78 of 1989);

“undertaking for collective investment” means, subject to paragraph (b)—

(i) a unit trust scheme, other than—

(I) a unit trust mentioned in section 731 (5)(a), or

(II) a special investment scheme (within the meaning of section 737 ),

which is or is deemed to be an authorised unit trust scheme (within the meaning of the Unit Trusts Act, 1990) and has not had its authorisation under that Act revoked,

(ii) any other undertaking which is an undertaking for collective investment in transferable securities within the meaning of the relevant Regulations, being an undertaking which holds an authorisation, which has not been revoked, issued pursuant to the relevant Regulations, or

(iii) any authorised investment company (within the meaning of Part XIII of the Companies Act, 1990) which—

(I) has not had its authorisation under that Part of that Act revoked, and

(II) has been designated in that authorisation as an investment company which may raise capital by promoting the sale of its shares to the public and has not ceased to be so designated,

which is neither a specified collective investment undertaking (within the meaning of section 734 (1)) nor an offshore fund (within the meaning of section 743 );

“unit” includes a share and any other instrument granting an entitlement—

(i) to a share of the investments or relevant profits of, or

(ii) to receive a distribution from,

an undertaking for collective investment;

“unit holder”, in relation to an undertaking for collective investment, means any person who by reason of the holding of a unit, or under the terms of a unit, in the undertaking is entitled to a share of any of the investments or relevant profits of, or to receive a distribution from, the undertaking;

“standard rate” has the same meaning as in section 3 (1);

“standard rate per cent” has the same meaning as in section 4 (1).

(b) For the purposes of this section and section 739 , references to an undertaking for collective investment (other than in this paragraph) shall be construed so as to include a reference to a trustee, management company or other such person who—

(i) is authorised to act on behalf, or for the purposes, of the undertaking, and

(ii) habitually does so,

to the extent that such construction brings into account for the purposes of this section and section 739 any matter relating to the undertaking, being a matter which would not otherwise be brought into account for those purposes.

(c) For the purposes of this section—

(i) as respects an undertaking for collective investment which is a company, where an accounting period of the company begins before the 6th day of April, 1994, and ends on or after that day, it shall be divided into 2 parts, one beginning on the day on which the accounting period begins and ending on the 5th day of April, 1994, and the other beginning on the 6th day of April, 1994, and ending on the day on which the accounting period ends, and both parts shall be treated as if they were separate accounting periods of the company, and

(ii) without prejudice to section 815 (2), any attribution of income or chargeable gains of such an undertaking to periods treated as separate accounting periods by virtue of subparagraph (i) shall be made—

(I) as respects such income, on the basis of the time that income arises to the undertaking, and

(II) as respects such capital gains, on the basis of the time of disposal of the assets concerned,

and section 4 (6) shall not apply for the purpose of such attribution.

(2) (a) Other than in the case of subsections (7) to (9) of section 734 , that section shall not apply, and the following provisions of this section shall apply, to an undertaking for collective investment as respects the chargeable periods of the undertaking ending on or after—

(i) the 6th day of April, 1994, if the undertaking was carrying on a collective investment business on the 25th day of May, 1993, or

(ii) the 25th day of May, 1993, if the undertaking was not carrying on such a business at that date.

(b) (i) As respects an undertaking for collective investment which is a company, the corporation tax which is chargeable on its profits on which corporation tax falls finally to be borne for a chargeable period shall be reduced for the purposes of the Tax Acts so that, before it is reduced by any credit, relief or other reduction under those Acts (other than under this section), it is the standard rate, for the year of assessment in which the chargeable period falls, of those profits.

(ii) For the purposes of this paragraph, where part of the chargeable period falls in one year of assessment (in this subparagraph referred to as “the first-mentioned year”) and the other part falls in the year of assessment succeeding the first-mentioned year and different standard rates are in force for each of those years, “the standard rate” shall be deemed to be a rate per cent determined by the formula—

where—

A is the standard rate per cent in force for the first-mentioned year,

B is the standard rate per cent in force for the year of assessment succeeding the first-mentioned year,

C is the length of that part of the chargeable period falling in the first-mentioned year,

D is the length of that part of the chargeable period falling in the year of assessment succeeding the first-mentioned year, and

E is the length of the chargeable period.

(c) In computing profits for the purposes of paragraph (b), section 78 (2) shall apply as if the rate per cent of capital gains tax specified in section 28 (3), were the rate per cent of corporation tax specified in section 21 (1)(b).

(d) As respects an undertaking for collective investment which is not a company—

(i) the capital gains tax which is chargeable on the chargeable gains accruing in a year of assessment to the undertaking shall be reduced so that the amount of such tax, before it is reduced by any credit, relief or other deduction under any provision, other than under this section, of the Tax Acts or the Capital Gains Tax Acts, is the standard rate, for the year of assessment, of the chargeable gains accruing to the undertaking, and

(ii) only so much of income arising or gains accruing to the undertaking shall be chargeable to income tax or capital gains tax, as the case may be, as is or is to be—

(I) paid to, or

(II) accumulated or invested for the benefit of,

unit holders in the undertaking or as would be so paid, accumulated or invested if any gains accruing to the scheme by virtue of subsection (4) were gains on an actual disposal of the assets concerned.

(3) (a) (i) Section 129 shall not apply as respects a distribution received by an undertaking for collective investment which is a company, and the income represented by the distribution shall be equal to the aggregate of the distribution and the amount of the tax credit in respect of the distribution.

(ii) Where an undertaking for collective investment which is a company is entitled to a tax credit in respect of a distribution which is chargeable to corporation tax by virtue of subparagraph (i)—

(I) it may set the credit against the corporation tax, as reduced by virtue of subsection (2)(b), chargeable on its profits for the chargeable period in which the distribution is made and where the credit exceeds that corporation tax the excess shall be paid to it, and

(II) notwithstanding sections 4 and 156 , the income represented by the distribution shall not be franked investment income for the purposes of sections 83 and 157 .

(b) Where a company resident in the State makes a distribution to an undertaking for collective investment which is not a company, the tax credit, if any, attaching to the distribution shall be set against—

(i) the income tax chargeable in respect of income arising to, or

(ii) the capital gains tax, as reduced by subsection (2)(d)(i), chargeable in respect of chargeable gains accruing to,

the undertaking for the year of assessment in which the distribution is made, and—

(I) where the credit exceeds the aggregate of that income tax and capital gains tax, the excess shall be paid to the undertaking, and

(II) a payment shall not be made in respect of the credit under section 136 (4).

(c) Notwithstanding Chapter 4 of Part 8 , that Chapter shall apply to a deposit (within the meaning of that Chapter) which is for the time being beneficially owned by an undertaking for collective investment which is not a company as if such a deposit were not a relevant deposit (within the meaning of that Chapter).

(4) (a) (i) Every asset of an undertaking for collective investment on the day on which a chargeable period of the undertaking ends shall, subject to subparagraph (ii) and paragraphs (b) to (e), be deemed to have been disposed of and immediately reacquired by the undertaking at the asset's market value on that day.

(ii) Subparagraph (i) shall not apply to—

(I) assets to which section 607 applies other than where such assets are held in connection with a contract or other arrangement which secures the future exchange of the assets for other assets to which that section does not apply, and

(II) assets which are strips within the meaning of section 55 .

(b) Subject to paragraphs (c) and (d), chargeable gains or allowable losses, which would otherwise accrue to an undertaking for collective investment on disposals deemed by virtue of paragraph (a) to have been made in a chargeable period (other than a period in which the collective investment business of the undertaking concerned ceases) of the undertaking, shall be treated, subject to subparagraphs (ii) and (iii), as not accruing to it, and instead—

(i) there shall be ascertained the difference (in this subsection referred to as “the net amount”) between the aggregate of those gains and the aggregate of those losses,

(ii) one-seventh of the net amount shall be treated as a chargeable gain or, where it represents an excess of losses over gains, as an allowable loss accruing to the undertaking on disposals of assets deemed to be made in the chargeable period, and

(iii) a further one-seventh shall be treated as a chargeable gain or, as the case may be, as an allowable loss accruing on disposals of assets deemed to be made in each succeeding chargeable period until the whole amount has been accounted for.

(c) For any chargeable period of less than one year, the fraction of one-seventh referred to in paragraph (b)(iii) shall be proportionately reduced and, where this paragraph has applied in relation to any chargeable period before the last such period for which paragraph (b)(iii) applies, the fraction treated as accruing in that last chargeable period shall be reduced so as to secure that no more than the whole of the net amount has been accounted for.

(d) Where the collective investment business of the undertaking concerned ceases before the beginning of the last of the chargeable periods for which paragraph (b)(iii) would apply in relation to a net amount, the fraction of that amount that is treated as accruing in the chargeable period in which the business ceases shall be such as to secure that the whole of the net amount has been accounted for.

(e) Where in a chargeable period an undertaking for collective investment incurs a loss on the disposal (in this paragraph referred to as “the first-mentioned disposal”) of an asset the gain or loss in respect of a deemed disposal of which was included in a net amount to which paragraph (b)(ii) applied for any preceding chargeable period, so much of the allowable loss on the first-mentioned disposal as is equal to the excess of the amount of the loss over the amount which but for paragraph (a) would have been the allowable loss on the first-mentioned disposal shall be treated for the purposes of paragraph (b) as an allowable loss which would otherwise accrue to the undertaking for collective investment on disposals deemed by virtue of paragraph (a) to have been made in the chargeable period.

(5) Notwithstanding the Capital Gains Tax Acts, for the purposes of computing chargeable gains accruing to an undertaking for collective investment—

(a) (i) section 556 , and

(ii) section 607 ,

shall not apply,

(b) section 581 shall as respects—

(i) subsections (1) and (2) of that section, and

(ii) subsection (3) of that section, in so far as a chargeable gain is not thereby disregarded for the purposes of that subsection,

apply as if subsection (4), paragraph (a)(ii) and paragraph (c) had not been enacted, and

(c) if the undertaking was carrying on a collective investment business on the 25th day of May, 1993, it shall be deemed to have acquired each of the assets it holds on the 5th day of April, 1994, apart from assets to which section 607 applies, at the asset's market value on that date.

(6) Subject to subsection (4)(b), where an undertaking for collective investment incurs allowable losses on disposals or deemed disposals of assets in a chargeable period, the amount (if any) by which the aggregate of such allowable losses exceeds the aggregate of chargeable gains on such disposals in the chargeable period shall—

(a) be disregarded for the purposes of section 31 ,

(b) be treated as reducing the income chargeable to income tax or corporation tax arising to the undertaking in that chargeable period, and

(c) to the extent that it is not treated as reducing income arising to the undertaking in that chargeable period, be treated for the purposes of the Capital Gains Tax Acts and this subsection as an allowable loss incurred on a disposal of an asset deemed to be made in the next chargeable period.

(7) (a) In this subsection—

“the appropriate amount in respect of the interest” means the appropriate amount in respect of the interest which would be determined in accordance with Schedule 21 if the undertaking for collective investment was the first buyer and it carried on a trade to which section 749 (1) applies but, in determining the appropriate amount in respect of the interest in accordance with Schedule 21 , paragraph 3(4) of that Schedule shall apply as if “in the opinion of the Appeal Commissioners” were deleted;

“securities” has the same meaning as in section 815 .

(b) Where in a chargeable period an undertaking for collective investment disposes of any securities and in the following chargeable period or its basis period interest becoming payable in respect of the securities is receivable by the undertaking for collective investment, then, the gain or loss accruing on the disposal shall be computed as if the price paid by the undertaking for collective investment for the securities was reduced by the appropriate amount in respect of the interest.

(c) Where for a chargeable period paragraph (b) applies so as to reduce the price paid for securities, the amount by which the price paid for the securities is reduced shall be treated as a loss arising in the following chargeable period from the disposal of the securities.

(8) Notwithstanding any provision of the Tax Acts or the Capital Gains Tax Acts other than section 739 , unit holders in an undertaking for collective investment shall not be entitled to any credit for or repayment of any income tax, capital gains tax or corporation tax paid in respect of income arising to, capital gains accruing to or profits of the undertaking.

(9) (a) Notwithstanding subsection (2) but subject to paragraph (b), subsections (1) to (8) and section 739 shall be construed as respects designated undertakings for collective investment and guaranteed undertakings for collective investment as if every reference in those subsections and in that section—

(i) to the 5th day of April, 1994, were a reference to the 5th day of April, 1998, and

(ii) to the 6th day of April, 1994, were a reference to the 6th day of April, 1998,

and, as respects such an undertaking, those subsections and section 739 shall not apply except as so construed.

(b) Where—

(i) the aggregate of the consideration (determined in accordance with section 547 ) given for the designated assets owned at any time after the 25th day of May, 1993, and before the 5th day of April, 1997, by a designated undertaking for collective investment is less than 80 per cent of the aggregate of the consideration (as so determined) given for the total assets owned by the undertaking at that time, or

(ii) at any time before the 5th day of April, 1997, a guaranteed undertaking for collective investment makes any payment to unit holders in the undertaking which is not a payment in cancellation of those units,

paragraph (a) shall be construed as respects that undertaking as if each reference in that paragraph—

(I) to the 5th day of April, 1998, were a reference to the 5th day of April, and

(II) to the 6th day of April, 1998, were a reference to the 6th day of April,

subsequent to the time referred to in subparagraph (i) or (ii), as the case may be.

739. —(1) Subject to this section, as respects a payment made on or after the 6th day of April, 1994, in money or money's worth to a unit holder by reason of rights conferred on the holder as a result of holding units in an undertaking for collective investment—

(a) where the holder is not a company, the payment shall not be reckoned in computing the total income of the holder for the purposes of the Income Tax Acts, and

(b) where apart from this paragraph the payment would be taken into account for the purposes of computing income chargeable to corporation tax, such payment shall be treated as if it were the net amount of an annual payment chargeable to tax under Case IV of Schedule D from the gross amount of which income tax has been deducted at the standard rate.

(2) (a) This subsection shall apply to a payment which—

(i) is made on or after the 6th day of April, 1994, in money or money's worth, by reason of rights conferred on a unit holder as a result of holding units in an undertaking for collective investment, and

(ii) apart from subsection (1) would be charged to corporation tax under Case I of Schedule D.

(b) Subsection (1) shall not apply to a payment to which this subsection applies.

(c) For the purposes of the Tax Acts other than paragraphs (d) and (e)—

(i) the income for a chargeable period attributable to a payment to which this subsection applies shall be increased by an amount determined by reference to paragraph (d), and

(ii) the amount so determined shall be deemed to be an amount of income tax which shall—

(I) be set off against corporation tax assessable on the unit holder for the chargeable period, or

(II) in so far as it cannot be set off in accordance with clause (I), be repaid to the unit holder.

(d) The amount referred to in paragraph (c), by which the income attributable to a payment to which this subsection applies is to be increased, shall be determined by the formula—

where—

I is the income attributable to a payment to which this subsection applies, and

A is the standard rate per cent for the year of assessment in which the payment is made.

(e) For the purposes of this subsection, in computing income attributable to a payment—

(i) an amount shall be deducted from the payment if the payment arises on a sale or other transfer of ownership, or on a cancellation, redemption or repurchase by the undertaking for collective investment, of units or an interest in units, and an amount shall not be deducted otherwise,

(ii) subject to subparagraphs (iii) to (v), the amount of the consideration in money or money's worth given by or on behalf of the unit holder for the acquisition of units or an interest in units for which the payment is made, and not any other amount, shall be deducted from the payment,

(iii) where units are acquired by the unit holder before the 6th day of April, 1994, in an undertaking for collective investment carrying on business on the 25th day of May, 1993, the consideration for the acquisition of the units shall be deemed to be the amount of their market value (within the meaning of section 548 ) on the 6th day of April, 1994, if that amount is greater than the consideration given, or deemed by virtue of subparagraph (iv) to be given, by the unit holder for their acquisition,

(iv) where units are acquired by a unit holder for a consideration which is less than the market value (within the meaning of section 548 ) of the units on the day the unit holder acquired them, the consideration given by the unit holder for those units shall be deemed to be that market value, and

(v) the amount of consideration given for units shall be determined in accordance with section 580 .

(3) (a) Subject to paragraph (b) and subsections (5) and (6), as respects a disposal on or after the 6th day of April, 1994, of units in an undertaking for collective investment by a person other than a company—

(i) no chargeable gain shall accrue on the disposal if the person disposing of the units acquired them on or after that date, and

(ii) if the person disposing of the units acquired them before that date, the chargeable gains on the disposal shall be computed as if—

(I) the consideration for the disposal were the market value of the units on the 5th day of April, 1994, and

(II) for the purposes of selecting the appropriate multiplier (within the meaning of section 556 ) and of applying paragraph 25 of Schedule 32 the disposal were made in the year 1993-94,

and for the purposes of this subsection and subsection (4) references to units shall be construed as including a reference to an interest in units, and accordingly this subsection and subsection (4) shall apply with any necessary modifications.

(b) Clause (I) of paragraph (a)(ii) shall not apply in relation to the disposal of units if as a consequence of the application of that clause—

(i) a gain would accrue on that disposal to the person making the disposal and either a smaller gain or loss would so accrue if that clause did not apply, or

(ii) a loss would so accrue and either a smaller loss or a gain would accrue if that clause did not apply,

and accordingly, in a case to which subparagraph (i) or (ii) applies, the amount of the gain or loss accruing on the disposal shall be computed without regard to clause (I) of paragraph (a)(ii) but, in a case where this paragraph would otherwise substitute a loss for a gain or a gain for a loss, it shall be assumed in relation to the disposal that the units were acquired by the person disposing of them for a consideration such that neither a gain nor a loss accrued to that person on making the disposal.

(4) (a) Subject to paragraph (b) and subsections (5) and (6), as respects a disposal by a company on or after the 6th day of April, 1994, of units in an undertaking for collective investment, for the purposes of the Corporation Tax Acts—

(i) any chargeable gain accruing on the disposal shall, notwithstanding section 21 (3), be treated as if it were the net amount of a gain from the gross amount of which capital gains tax has been deducted at the standard rate of income tax,

(ii) the amount to be taken into account in respect of the chargeable gain in computing in accordance with section 78 the company's chargeable gains for the accounting period in which the company disposes of the units shall be the gross amount of the chargeable gain, and

(iii) the capital gains tax treated as deducted from the gross amount of the chargeable gain shall—

(I) be set off against the corporation tax assessable on the company for the accounting period, or

(II) in so far as it cannot be set off in accordance with clause (I), be repaid to the company.

(b) As respects a disposal by a company of units which it acquired before the 6th day of April, 1994, in an undertaking for collective investment carrying on business on the 25th day of May, 1993, paragraph (a) shall apply only to so much of the chargeable gain accruing to the company on that disposal of units as does not exceed the chargeable gain which would have accrued on that disposal had the company sold and immediately reacquired those units on the 5th day of April, 1994, at their market value on that day.

(c) This subsection shall be disregarded for the purposes of section 546 (2).

(5) (a) Where a person (in this subsection referred to as “the disponer”) disposing of units in an undertaking for collective investment acquired them—

(i) on or after the 6th day of April, 1994, and

(ii) in such circumstances that by virtue of any enactment other than section 556 (4) the disponer and the person from whom the disponer acquired them (in this subsection referred to as “the previous owner”) were to be treated for the purposes of the Capital Gains Tax Acts as if the disponer's acquisition were for a consideration of such an amount as would secure that, on the disposal under which the disponer acquired them, neither a gain nor a loss accrued to the previous owner,

then, the previous owner's acquisition of the interest shall be treated as the disponer's acquisition of the interest.

(b) Where the previous owner acquired the units disposed of on or after the 6th day of April, 1994, and in circumstances similar to those referred to in paragraph (a), the acquisition of the units by the previous owner's predecessor shall be treated for the purposes of this section as the previous owner's acquisition, and so on back through previous acquisitions in similar circumstances until the first such acquisition before the 6th day of April, 1994, or, as the case may be, until an acquisition on a disposal on or after that date.

(6) Where an undertaking for collective investment was not carrying on a collective investment business on the 25th day of May, 1993, this section shall apply as respects payments by, or disposals of units in, that undertaking as if—

(a) “on or after the 6th day of April, 1994,” were deleted from subsections (1), (2), (3) and (4), and

(b) paragraphs (a)(ii) and (b) were deleted from subsection (3).