The government is consulting on potential changes to the tax rules on how capital allowances are allocated to investors in authorised contractual schemes (ACS) and on the reporting obligations of fund managers. These schemes were introduced in 2013 as tax-transparent vehicles for international funds. An ACS is essentially a pool of assets held and managed on behalf of a number of participants (the investors) who are co-owners of the assets. An ACS may take one of two legal forms:
· a partnership ACS, formed as a limited partnership; or
· a co-ownership ACS (CoACS), formed under contracts agreed by the depositary, operator and participants.
Because ACS are transparent for tax purposes, the investors, rather than the fund, are entitled to claim any available capital allowances. Capital allowances will only be available where there is a qualifying activity, such as carrying on a trade or a property business. Where an ACS has invested in buildings, the claimant must have an ‘interest in land’.
There is some uncertainty over whether individual investors in a CoACS can, on their own, satisfy the condition of having a qualifying activity. For fixtures in buildings, there is uncertainty over whether the investors have an interest in land.
The consultation outlines a number of proposals, including:
· Clarify legislative uncertainties affecting investors in CoACS: Introduce legislation to clarify, for capital allowances purposes, what is a qualifying activity for investors in a CoACS, and what is an investor’s interest in land held by a CoACS.
· Reduce administrative burdens on CoACS: Introduce legislation permitting the operator of the CoACS to compute capital allowances for the activities of the CoACS as a whole and notify those capital allowances, as well as balancing allowances and balancing charges, to the investor.
· Report requirements in relation to investors: Introduce a legal requirement for the operator of the ACS to provide each investor with sufficient information to meet their UK tax obligations with respect to their participation in the ACS.
· Report requirements in relation to HMRC: Introduce a legal requirement for the operator of all ACS to provide the following information to HMRC:
o an annual list of all investors in the ACS at any stage in the previous accounting period; and
o on request, details of any information provided to investors for any given period, as well as any other information that HMRC might consider to be necessary.
· Penalties: Give consideration to financial penalties for failure to provide information to HMRC or to investors.
The government is consulting on potential changes to the tax rules on how capital allowances are allocated to investors in authorised contractual schemes (ACS) and on the reporting obligations of fund managers. These schemes were introduced in 2013 as tax-transparent vehicles for international funds. An ACS is essentially a pool of assets held and managed on behalf of a number of participants (the investors) who are co-owners of the assets. An ACS may take one of two legal forms:
· a partnership ACS, formed as a limited partnership; or
· a co-ownership ACS (CoACS), formed under contracts agreed by the depositary, operator and participants.
Because ACS are transparent for tax purposes, the investors, rather than the fund, are entitled to claim any available capital allowances. Capital allowances will only be available where there is a qualifying activity, such as carrying on a trade or a property business. Where an ACS has invested in buildings, the claimant must have an ‘interest in land’.
There is some uncertainty over whether individual investors in a CoACS can, on their own, satisfy the condition of having a qualifying activity. For fixtures in buildings, there is uncertainty over whether the investors have an interest in land.
The consultation outlines a number of proposals, including:
· Clarify legislative uncertainties affecting investors in CoACS: Introduce legislation to clarify, for capital allowances purposes, what is a qualifying activity for investors in a CoACS, and what is an investor’s interest in land held by a CoACS.
· Reduce administrative burdens on CoACS: Introduce legislation permitting the operator of the CoACS to compute capital allowances for the activities of the CoACS as a whole and notify those capital allowances, as well as balancing allowances and balancing charges, to the investor.
· Report requirements in relation to investors: Introduce a legal requirement for the operator of the ACS to provide each investor with sufficient information to meet their UK tax obligations with respect to their participation in the ACS.
· Report requirements in relation to HMRC: Introduce a legal requirement for the operator of all ACS to provide the following information to HMRC:
o an annual list of all investors in the ACS at any stage in the previous accounting period; and
o on request, details of any information provided to investors for any given period, as well as any other information that HMRC might consider to be necessary.
· Penalties: Give consideration to financial penalties for failure to provide information to HMRC or to investors.
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