IFM37720 - Accruals basis elections: making an election

TCGA92/S103KFA

TCGA92/S103KFB

An individual may make an accruals basis election in respect of an investment scheme if TCGA92/S103KA applies or is reasonably expected to apply in relation to the individual and the relevant scheme. Put another way, an election can be made where an individual has received a sum of carried interest from the scheme or reasonably expects that they will receive a sum of carried interest from the scheme. This will normally be the case where the individual has an entitlement to carried interest (for example, because they have become a limited partner in a carried interest partnership), even if it is not certain that carried interest will ever in fact arise.

The definition of an investment scheme is that contained in ITA07/S809EZA(6) (IFM36230).

An election under this section will only be valid if it is made in writing to HMRC, under the normal rules for claims and elections contained in TMA70/S42 (see CG13700P). An election could be made in a return, amendment to a return, or in writing sent to an officer of HMRC. The election must state:

  • The investment scheme that the election has been made in relation to; and
  • The first tax year to which the election applies

The election should be submitted to HMRC by 31 January following the end of that year. See the IFM37770 for detail on reporting elections and sums being taxed on the elective accruals basis.

Once an election has been made by an individual in relation to a specific investment scheme, then the election cannot be revoked even if it later seems unlikely that carried interest will arise from the scheme.

Where an investment scheme is associated with another investment scheme within the meaning of ITA07/S809FZZ, for example because they are parallel schemes, then the election will automatically apply to associated investment schemes. Where this Manual refers to an investment scheme, it should be assumed unless stated otherwise that the reference also extends to any associated investment schemes.