Remedial amendments to the PIE rules

A number of remedial amendments have been made to the tax rules for portfolio investment entities (PIEs). These amendments ensure that the rules achieve their intended policy effect.

Key features

Use of formation losses

The Act amends section HM 69(5) to ensure that, after the three-year spread required by HM 69(2), any residual formation loss is available for use by the relevant PIE investor class. Specifically, the rule has been amended to provide that any residual amount of tax loss is allocated to the PIE's next attribution period and can be used in its calculation of taxable income for the investor class under HM 35(5).

Other technical amendments

A number of amendments have been made to correct minor drafting and cross-referencing errors. These include:

• In Schedule 29 of the Income Tax Act 2007, the reference to "a community trust" is moved from Part B to Part A. This updated schedule now reflects the treatment of community trusts under the pre-rewrite rules, subpart HL.
• Section HM 25(3)(b) is amended so that a PIE (or investor class) does not lose PIE status if, within three months of the end of a quarter in which it has breached the PIE rules, the PIE announces that it will be wound up within 12 months.
• Section HM 60(4) is amended to remove the reference to CX 56B. If an investor has notified an incorrect rate to a PIE, the income attributed to them by that PIE will be treated as taxable under CX 56. It is therefore unnecessary to also treat distributions or dividends paid by that PIE as taxable income.

Application date(s)

There are various application dates for these remedial changes to the PIE rules.