IFM03120 - Investors in authorised investment funds (AIFs): accumulation units

Accumulation units in an AIF are a special type of interest in a fund. Under the terms of the units, income arising within the AIF during a distribution period is not distributed to investors as cash but it is retained in the fund as an additional capital investment on behalf of the investor but without the issue of any additional units. Amounts reinvested are taxed as income accruing to investors in the same way as if they had been distributed.

The reason for this treatment is to ensure that tax is not a factor which might distort investors’ choices and it prevents investors delaying payment of income tax through long-term accumulation of income.