Section 863I | Allocation of profit to the AIFM firm ^F1

(1)This section applies for a period of account of the AIFM trade if—

(a)the calculation under section 849 in relation to a partner (“P”) in the AIFM firm produces a profit, and

(b)P's share of that profit determined under section 850, 850A or 850C would, apart from this section, be a profit consisting (wholly or partly) of relevant restricted profit (see subsections (6) to (9)) chargeable to income tax under Chapter 2 of Part 2.

(2)P may allocate all or a part of the relevant restricted profit (“the allocated profit”) to the AIFM firm itself.

(3)If P does so—

(a)the allocated profit is to be excluded from P's share of the AIFM firm's profit mentioned in subsection (1)(b),

(b)the AIFM firm is to be treated in accordance with subsection (4) as if it were itself a person who is a partner in the AIFM firm (and for this purpose, in the case of a limited liability partnership, it is the body corporate which is to be treated as that person), and

(c)all enactments applying generally to income tax are to apply accordingly with any necessary modifications (subject to subsection (5)).

(4)The AIFM firm is treated on the following basis—

(a)the calculation under section 849 in relation to the AIFM firm for the period of account produces the profit mentioned in subsection (1)(a),

(b)the AIFM firm's share of that profit determined under section 850 is the allocated profit (and sections 850A and 850C are to be ignored),

(c)that share is chargeable to tax under Chapter 2 of Part 2 for the tax year in which the period of account ends (with the person liable for the tax charged being the AIFM firm), and

(d)the tax is charged at the additional rate.

(5)The Commissioners for Her Majesty's Revenue and Customs may make regulations modifying any of the following enactments applying to income tax as they apply by virtue of this section in relation to the AIFM firm—

(a)those relating to returns of information and supply of accounts, statements and reports,

(b)those relating to the assessing, collecting and receiving of income tax,

(c)those conferring or regulating a right of appeal, and

(d)those concerning administration, penalties, interest on unpaid tax and priority of tax in cases of insolvency under the law of any part of the United Kingdom.

(6)P's profit determined under section 850, 850A or 850C is “relevant restricted profit” so far as it represents variable remuneration awarded to P—

(a)as deferred remuneration (including deferred remuneration which, if it vests in P, will vest in the form of instruments), or

(b)as upfront remuneration which vests in P in the form of instruments with a retention period of at least 6 months.

(7)In order for any variable remuneration to count for the purposes of subsection (6) it must be awarded to P in accordance with arrangements which are consistent with the AIFMD remuneration guidelines (see section 863L).

(8)In the case of a firm which is an AIFM firm by virtue of section 863H(3)(b) only, this section applies only in relation to partners who fall within a category of staff which is classified as identified staff.

(9)Terms used in subsections (6) to (8) have the same meaning as in the AIFMD remuneration guidelines.