Taxation of Chargeable Gains Act 1992, section 99

Application of Act to unit trust schemes

Part III Individuals, partnerships, trusts and collective investment schemes etc

(1)This Act shall apply in relation to any unit trust scheme as if—

(a)the scheme were a company,

(b)the rights of the unit holders were shares in the company, and

(c)F468in the case of an authorised unit trust, the company were resident ... in the United Kingdom,

except that nothing in this section shall be taken to bring a unit trust scheme within the charge to corporation tax on chargeable gains.

[F469 (1A)Subsection (1) does not apply to an offshore fund that is a transparent fund within the meaning given by regulation 11 of the Offshore Funds (Tax) Regulations 2009 (see instead section 103D).F469]

(2)Subject to subsection (3) [F470and [F471 sections 99A and 151W(a)F471,F470]] below, in this Act—

(a) “unit trust scheme” has the [F472 meaning given by section 237(1) of the Financial Services and Markets Act 2000 F472] ,

[F473 (aa) “unit holder” means a person entitled to a share of the investments subject to the trusts of a unit trust scheme;

(b) “authorised unit trust” means, as respects an accounting period, a unit trust scheme in the case of which an order under section 243 of the Financial Services and Markets Act 2000 is in force during the whole or part of that period. F473]

[F474 (c) “open-ended investment company” has the meaning given by subsection (10) of section 468 of the Taxes Act, read with subsections (11) to (18) of that section, as those subsections are added by regulation 10(4) of the Open-ended Investment Companies (Tax) Regulations 1997 ; and accordingly references in subsections (11) to (16) of that section to “the Tax Acts” shall be construed as if they included references to this Act. F474]

(3)The Treasury may by regulations provide that any scheme of a description specified in the regulations shall be treated as not being a unit trust scheme for the purposes of this Act; and regulations under this section may contain such supplementary and transitional provisions as appear to the Treasury to be necessary or expedient.

Definitions used in section 99 8

company

“company” includes any body corporate or unincorporated association but does not include a partnership, and shall be construed in accordance with section 99 ;

Defined in s.288(1) · see it in the full Act

(5) In this paragraph “company” and “group” shall be construed in accordance with section 170(2) to (9).

Defined in Sch.2 para.5(5) · see it in the full Act
shares

“shares” includes stock;

Defined in s.288(1) · see it in the full Act

(5) In this paragraph, except in paragraphs (a) to (c) of sub-paragraph (6), “shares” includes an interest in shares.

Defined in Sch.7AC para.10(5) · see it in the full Act

(b) “shares” includes securities,

Defined in Sch.7 para.4(2) · see it in the full Act
the shares

(5) In sub-paragraphs (3) and (4) and in the following provisions of this Schedule references to “the shares” are to the shares referred to in sub-paragraph (1)(a).

Defined in Sch.7ZB para.1(5) · see it in the full Act

(a) references to “the shares” shall be construed in accordance with sub-paragraph (1) above, and

Defined in Sch.5B para.13(12) · see it in the full Act
the residents

(b) if 2 or more of them are then resident ... in the United Kingdom (“the residents”) it shall be treated as being as many equal capital payments as there are residents and each of them shall be treated as receiving one of the payments.

Defined in s.96(4) · see it in the full Act
resident

“resident” means resident in accordance with the statutory residence test in Part 1 of Schedule 45 to the Finance Act 2013 ;

Defined in s.288(1) · see it in the full Act
tax

and for the purposes of this definition “tax” means capital gains tax, corporation tax or income tax.

Defined in s.16A(2) · see it in the full Act
offshore fund

“offshore fund” has the meaning given in section 355 of TIOPA 2010 (but where two or more offshore funds make up a collective investment scheme they are to be treated as a single offshore fund subject to section 99A of this Act ));

Defined in s.288(1) · see it in the full Act
the Taxes Act

“the Taxes Act” means the Income and Corporation Taxes Act 1988 ;

Defined in s.288(1) · see it in the full Act

Cases considering section 99 3

HM Revenue & Customs v Smallwood

[2007] EWCA Civ 462 · 17 May 2007Interprets

The court treated section 99 as the special capital gains tax regime governing unit trust schemes and as requiring the statutory company-and-shares fiction to be applied. (see paras [21]; [52]-[56]; [70]-[71]) Section 99(1) required the scheme to be treated as a company and unit holders’ rights as shares. The resulting fiction meant that the property was an asset of the notional company, while the subscription was consideration for the notional shares. (see paras [54]; [70]-[80]) The court noted that the Treasury power to disapply section 99 had not been used to exclude enterprise zone property unit trusts. Section 99 therefore remained applicable to the scheme. (see para [55])

Barker v Baxendale Walker Solicitors (a firm)

[2016] EWHC 664 (Ch) · 23 March 2016

Applies the statutory corporate veil for a unit trust scheme, treating the sale as a disposal by a company rather than of Mr Barker’s beneficial interest. This supported the assessment that the hypothetical scheme could have avoided an immediate gain. (see paras [203]-[205])

Revenue & Customs v Smallwood

[2006] EWHC 1653 (Ch) · 6 July 2006Interprets

Confirms the wider statutory fiction under which the unit trust and unit holders are treated as a company and shareholders for capital gains tax purposes (see paras [23]-[26], [35]-[39]). Interprets section 99(1) as requiring the unit trust to be treated as a company and unit holders’ rights as shares. The fiction necessarily treats subscriptions as consideration for notional shares and trust assets and expenditure as those of the notional company (see paras [24]-[25], [35]-[39], [62]-[66]).

What each judgment says about section 99 is in the case-law panel in the full Act.

Amendments and notes

10 notes from legislation.gov.uk

Amendments

  1. F468Words in s. 99(1)(c) omitted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 96
  2. F469S. 99(1A) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Collective Investment Schemes and Offshore Funds (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2017 (S.I. 2017/1204), regs. 1(1), 3
  3. F470Words in s. 99(2) inserted (with effect in accordance with s. 118(5) of the amending Act) by Finance Act 2004 (c. 12), s. 118(2)(a)
  4. F471Words in s. 99(2) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 199 (with Sch. 9 paras. 1-9, 22)
  5. F472Words in s. 99(2)(a) substituted (1.12.2001) by The Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629), arts. 1(2)(a), 62(1)
  6. F473S. 99(2)(aa)(b) substituted for s. 99(2)(b) (with effect in accordance with s. 118(5) of the amending Act) by Finance Act 2004 (c. 12), s. 118(2)(b)
  7. F474S. 99(2)(c) added (28.4.1997) by The Open-ended Investment Companies (Tax) Regulations 1997 (S.I. 1997/1154), regs. 1(1), 20

Modifications

  1. C158S. 99 extended (27.7.1993) by 1993 c. 37, s. 12, Sch. 2 Pt. I para. 22(2)
  2. C159S. 99(1) excluded in part by The Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964), reg. 14B (as inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by S.I. 2008/3159, regs. 1(1), 11)
  3. C160S. 99(1) excluded in part (9.12.2021) by S.I. 2006/964, reg. 14DA(2)(d) (as inserted by The Authorised Investment Funds (Tax) (Amendment) Regulations 2021 (S.I. 2021/1270), regs. 1, 3(2))