IFM03420 | Tax treatment of investors in qualified investor schemes (QISs) and long-term asset funds (LTAFs): consequences if the genuine diversity of ownership condition is breached

Consequences for all investors

If a QIS or LTAF breaches the genuine diversity of ownership (GDO) condition, investors will be taxed on dividend distributions and chargeable gains in the same way as distributions from other companies.

Corporate investors – additional consequences

Where a corporate investor has invested in a QIS or LTAF which does not meet the GDO condition, regulation 51 of SI 2006/964 sets out two additional consequences:

If the corporate investor is a life insurance company, section 212 of the Taxation of Chargeable Gains Act does not apply for that accounting period. Section 212 provides for a deemed annual chargeable gain on investments in collective investment schemes held by an insurance company for its long-term business and spreads that deemed gain over seven accounting periods.

Sections 490 and 492 of the Corporation Tax Act 2009 (which require certain interest distributions to be treated as loan relationship credits) do not apply, because a QIS or LTAF which does not meet the GDO condition is not in any case able to make interest distributions.