delete The Unit Trust Schemes and Offshore Funds (Non-qualifying Investments Test) Order 2006
This Order amends Schedule 10 to the Finance Act 1996 regarding the non-qualifying investments test for unit trust schemes, offshore funds, and open-ended investment companies. It expands the categories of qualifying derivative contracts and contracts for differences, adds detailed definitions for hedging relationships, introduces 'alternative finance arrangements' as a qualifying category, and modifies the test to include paragraphs (e) to (h). The rules include accounting practice requirements and specify conditions for hedging relationship designation.
This regulation exemplifies regulatory complexity that distort capital allocation by picking winners among investment types through tax treatment. The detailed definitional requirements for hedging relationships, GAAP compliance mandates, and the prescriptive enumeration of qualifying derivative contracts create substantial compliance burdens that advantage incumbent financial institutions over smaller entrants. Such rules represent centrally-planned intervention in financial markets rather than allowing investors to freely structure their risk management. The non-qualifying investments test itself is an unnecessary restriction on how collective investment schemes may structure their portfolios, restricting the very flexibility that makes such vehicles useful for investors.