IFM16260 - Exchanges, Mergers, Schemes of Reconstruction: Collective investment schemes; Anti-Avoidance Rule

Section 103K Taxation of Chargeable Gains Act 1992 (TCGA)

Relief under sections 103G to 103I is only available if the arrangements are carried out for bona fide commercial reasons and do not form part of arrangements where the main purpose, or one of the main purposes, is to avoid tax.

That anti-avoidance rule can be disregarded where:

• Units are issued to an investor who holds 5% or less of the units in the scheme, or in the relevant class of units. To establish whether an investor is within the 5% threshold the holdings of connected investors should be included.
• HMRC has given clearance to the arrangements under section 138 TCGA.

Under section 103K where a person is subject to a charge to tax because their disposal of units failed the anti-avoidance rule and they fail to pay the tax due within a certain timeframe, HMRC may in specified circumstances require payment of the unpaid tax from the person who acquired the units.