Avoidance using Authorised Investment Funds (AIF)

Dividend distributions from AIFs paid to UK companies must be 'streamed' into a dividend element and an annual payment element, the latter being grossed up for basic rate tax and carrying an income tax credit.

In detail

On or after 1 January 2009 changes will take effect to prevent the existing anti-avoidance rule being circumvented.

The anti-avoidance rule converts the income tax credit into deemed foreign tax for certain financial traders which should in general reduce the value of the credit.

The only investors remaining within the current rules are general insurance companies for which the AIF dividend is not treated as a trading receipt.