LAM03300 - Calculation of 'I' Income and chargeable gains: Collective investment schemes - annual deemed disposal: overview: TCGA92/S212
Holdings in authorised unit trusts (and other collective investment vehicles) are subject to an annual deemed disposal and reacquisition at market value for chargeable gains purposes TCGA92/S212.
The deemed disposal and reacquisition arises at the end of an accounting period, on the following assets held by an insurance company for the purposes of its long-term business:
| Asset type | Description | Further References |
|---|---|---|
| Authorised Unit Trust – an authorised investment fund ‘AIF’ | SI2006/964 | IFM02000 |
| Open ended investment Company (OEIC) – also an AIF | SI2006/964/Regulation 98 | IFM02130 |
| Offshore funds | TIOPA2010/PART8 and SI2009/3001 | IFM12000 |
| Authorised contractual scheme- co-ownership scheme (ACS) | TCGA92/103D, SI2013/1400 | IFM08000 |
| UK Real Estate Investment Trust (REIT) | CTA10/S518 | IFM21000 |
All bond funds, whether UK funds or offshore funds, are treated as loan relationships within CTA09/PT6/CH3 are not within TCGA92/S212.
More detail on each of these categories is included in the relevant HMRC manuals (see LAM03310).
The deemed disposal only applies to assets to the extent that they are referable to BLAGAB (using the apportionment rules LAM05000) TCGA92/S213(1A)).
The impact of being included in the deemed disposal rule is summarised below:
- a disposal and immediate reacquisition is deemed to take place at market value at the end of the accounting period, then
- the gain or loss referable to BLAGAB is determined under FA12/S99-101 using a commercial method FA12/S98
- any net gain arising from the deemed disposals is spread over seven years FA12/S213. See example in LAM03330
- any net loss arising from the deemed disposals can be spread over seven years or carried back two years (most recent years first). Offset for carry back is against the net gain from the deemed disposals in the carry back year before spreading. See example in LAM03340.
- for each accounting period the sum of spread forward chargeable gains and/or allowable losses feeds into the calculation of BLAGAB chargeable gains FA12/S75
These rules aim to ensure that gains are not indefinitely deferred by holding investments within collectives, such as UK equity OEICs that are exempt from tax on chargeable gains. The flexibility in loss carry back contained in the rules recognises that temporary fluctuations in value may create large gains followed by losses which may be due to the timing of the year end and temporary fluctuations rather that reflecting real overall gains.
There are in addition special rules covering:
- cessations and transfers of business TCGA92/S213(4) and TCGA/S213ZA LAM13040
- seeding an Authorised Contractual Scheme TCGA92/S118 LAM03350
- losses on transfers to a connected authorised investment manager TCGA92/S210C LAM03350
The application of S212 provisions to the different categories of funds is further set out in LAM03310