D8.146 Co-ownership authorised contractual schemes—tax implications and reporting requirements
For the latest New Development, see ND.1847.
An authorised contractual scheme is transparent for tax purposes, ie the scheme itself incurs no tax liability. This means that its investors are treated as if they had invested directly in the underlying assets of the scheme and are subject to personal taxation accordingly. So, whereas AUTs etc are opaque for fiscal purposes, authorised contractual schemes allow any investor, including tax-exempt investors, to access their appropriate tax rate.
Regulations detail the following tax treatment for capital gains tax purposes:
(a) a participant's interests in the property subject to a co-ownership authorised contractual scheme (CoACS) are disregarded for the purposes of capital gains tax and instead the participant's holding of units issued under the CoACS is treated as an asset for the purposes of capital gains tax1. A capital gain or loss will not be attributable to an investor when a disposal is made by the scheme nor when the investors' precise share of a scheme asset increases or decreases through the contraction or expansion of the scheme. The disregard does not apply, however, in applying TCGA 1992, s 37B (increase in consideration on disposal of an interest in a building or structure by reference to which structures and buildings allowance has been given; see B3.277) to the disposal by the participant of units in the fund2.
Similar provision has not been made for partnership schemes. The asset held by the investor will be their share
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