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HM 6: Intended effects for multi-rate PIEs and investors
or “How tax works for multi-rate PIEs and their investors”
You could also call this:

“Optional rules for investment funds to treat income from other funds as their own”

You can choose to use special rules if you’re a type of investment fund called a PIE. These rules apply when one PIE (called a retail PIE) invests in another PIE (called a wholesale PIE).

If you’re a retail PIE, you can decide to look through to the income and expenses of the wholesale PIE you’ve invested in. This means you can treat the income and expenses of the wholesale PIE as if they were your own, based on how much you’ve invested.

To use these rules, you need to have enough information to properly account for the income and expenses, and to pay the right amount of tax.

When you use these rules, you should ignore any transactions between you (the retail PIE) and the wholesale PIE that relate to this income or these expenses.

If you’re a special type of retail PIE called a foreign investment variable-rate PIE, and you invest in a wholesale PIE that meets certain requirements, you can treat some of the income you get as if it came from overseas. You can find more information about this in section HM 55G.

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Next up: HM 7: Requirements

or “Rules for becoming and staying a Portfolio Investment Entity (PIE)”
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Part H Taxation of certain entities
Portfolio investment entities: Introductory provisions

HM 6BOptional look-through rules for certain PIEs

  1. This section applies when a PIE (a retail PIE) is a zero-rated investor in another PIE (a wholesale PIE).

  2. The retail PIE may choose to apply a look-through approach in relation to its investor interest, treating the attributed PIE income or attributed PIE loss as consisting of—

  3. the proportion of the assessable income derived by the wholesale PIE that corresponds to the investor interest; and
    1. the proportion of the expenditure or loss incurred by the wholesale PIE that corresponds to the investor interest.

      1. In choosing to apply this section, the retail PIE must have sufficient information to enable it to account for the income, expenditure, or loss, and to discharge its tax obligations in relation to those amounts.

      2. In the application of subsections (1) to (3), any transaction or attribution between the wholesale PIE and retail PIE relating to the income or expenditure is ignored.

      3. When a retail PIE that is a foreign investment variable-rate PIE derives an amount allowable under section HM 55G through having an investor interest in a wholesale PIE that meets the requirements of section HM 19B(1), the retail PIE may treat the amount as a foreign-sourced amount.

      Notes
      • Section HM 6B: replaced (with effect on 1 April 2012), on (applying for the 2012–13 and later income years), by section 89(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).