An ACS is an onshore collective investment scheme. It has no legal ‘personality’ and does not constitute an entity in its own right. The consultation defines it as ‘essentially a pool of assets held and managed on behalf of a number of participants (the investors) who are co-owners of the assets’.

The consultation aims to review the essential capital allowances principles when applied to ACS, reporting requirements and general plans to tighten up use and potential abuse of ASCs.

HMRC highlights concerns around scenarios where one investor in an ASC sells their holding, then there could be a part disposal for capital allowance purposes.

Currently this can cause difficulties as under the rules for fixtures in buildings, unless an election under section 198 of the Capital Allowances Act is made the capital allowances would be lost to future owners of the building. HMRC wants to clarify the issue to ensure that use of capital allowances is in line with current rules.

The government has also set out proposals for changes to requirements on the ACS to report information to investors and HMRC. 

It is likely that a stringent new scanctions regime will be introduced for ACS who fail to comply with reporting deadlines to HMRC and investors.

The entry threshold for individual investors is set at £1m so the primary focus of the consultation is the pension funds and institutional investors. As a result, an ACS is not a taxable entity and is not within the charge to direct taxes. Each participant is responsible for tax arising on their own share of income and gains.

The consultation, HMRC Authorised contractual schemes: reducing tax complexity for investors can be read here.