Jurisdiction(s):
United Kingdom

Key definition

Funds definition

What does Funds mean? In legal practice, funds describes pooled investment arrangements where assets are managed to a stated investment objective for the benefit of participating investors. The term is descriptive and used across multiple contexts; specific definitions and rules appear in legislation and regulation, including the Financial Services and Markets Act 2000 and the UCITS and AIFMD regimes (as implemented in the UK and Ireland). Typical features include: investors holding units or shares that represent a proportionate interest; pricing by reference to net asset value; assets held by an independent depositary or custodian separate from the manager; and operation under constitutional documents and...

UK TEFs for authorised investment funds: eligibility conditions, HMRC application and appeals, income categorisation, dividend and non-dividend distributions, breaches, termination and voluntary exit

Published by a LexisNexis Tax expert

Practice notes

Tax elected fund (TEF)

A ‘tax elected fund’ (TEF) is an authorised Investment fund (AIF) that has obtained TEF status by applying successfully to HMRC. Mirroring the PAIF framework (available to certain AIFs that hold property), a dedicated set of tax Rules for TEFs aims to shift the incidence of taxation from the fund vehicle to the investor in practice. Consequently, TEF investors are taxed as if they had owned the underlying assets outright themselves. Apart from particular provisions found in the TEF rules, TEFs otherwise remain subject to the tax treatment that generally applies to AIFs in general terms. Brought in during 2009, the TEF regime sought to enhance the tax efficiency of Funds investing in a mixed portfolio of assets—this is achieved as the TEF structure allows different categories of income to be streamed to investors in effect. The TEF approach is not appropriate for funds that derive income directly from a property business (UK or overseas), for which the PAIF regime may instead be used where appropriate. In the government’s broader review of the UK funds regime, begun in 2021, it was noted that adoption of TEF status has been relatively limited...

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Web page updated on 22/05/2026

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