IFM02140 - Authorised investment funds (AIFs): structure, arrangement and tax status of funds: umbrella funds or companies

An umbrella fund (in the case of an open-ended investment company - an umbrella company) is a type of authorised investment fund (AIF) that has a number of sub-funds and under which unit holders have the right to exchange units in one sub-fund for units in another.

For tax purposes each sub-fund is treated as a separate AIF (see SI 2006/964 Regulation 7 which covers both authorised unit trusts and open-ended investment companies).

This means that the umbrella company or trust is not treated as a company for tax purposes. It is ignored. Instead each separate sub-fund is regarded as an authorised unit trust or open-ended investment company (OEIC), as the case may be, in its own right.

Sub-funds are also treated separately for chargeable gains purposes under s99A TCGA 1992 (applied to OEICs by regulation 98 of SI 2006/964).

An exchange of units in one sub-fund for those of another may constitute a disposal of one asset and acquisition of another, subject to the rules on exchanges, mergers and schemes of reconstruction in Chapter 4 Part 3 TCGA 1992.