INCOME TAX Citation and commencement 1 These Regulations may be cited as the Individual Savings Account (Amendment No. 3) Regulations 2005 and shall come into force on 27th December 2005. Amendment of the Individual Savings Account Regulations 1998 2 The Individual Savings Account Regulations 1998 are amended as follows. 3 In regulation 2(1)(a) insert the following definition at the appropriate place— “credit union” means a society registered as a credit union under the Industrial and Provident Societies Act 1965 or the Credit Unions (Northern Ireland) Order 1985 ; . 4 In regulation 2(1)(b)— a in the definition of “the second condition” , in paragraph (i), after “section” insert “264,”; b in the definition of “fund of funds scheme” for “and” (where it last appears) substitute “or”; c insert the following definitions at the appropriate places— “non-UCITS retail scheme”— has the meaning in the New Collective Investment Schemes Sourcebook (that is, a scheme to which, or to whose authorised fund manager and depositary, Sections 5.1, 5.4 and 5.6 of that Sourcebook apply), includes a “recognised scheme” by virtue of section 270 or 272 of the Financial Services and Markets Act 2000 , which would fall within paragraph (a) of this definition if it were an authorised fund, and includes a sub-fund of an umbrella which the terms of the scheme identify as a sub-fund which would fall within paragraph (a) or (b) of this definition if it were itself an authorised fund or a recognised scheme. In this definition, expressions defined in the Glossary forming part of the Financial Services Authority Handbook have those defined meanings; “qualifying units in or shares of a non-UCITS retail scheme” means that— the instrument constituting the scheme secures that redemption of the units or shares in question shall take place no less frequently than bi-monthly (see Rule 6.2.16(6) of the New Collective Investment Schemes Sourcebook omitting the words “Except where (7) applies, and”, read with Rule 6.3.4(1), whether or not those Rules apply to the scheme), and a provision for suspension of dealings in exceptional conditions in accordance with Rule 7.2 of that Sourcebook (or any foreign procedure which is a direct foreign equivalent of that Rule) shall not be treated as a provision contrary to paragraph (a) of this definition; . 5 In regulation 6(4)(i) after “deposit-taker” insert “(including for this purpose a credit union)”. 6 In regulation 7(2) — a in sub-paragraph (b)(ii)— i after paragraph (a) insert “and”; ii omit paragraph (c) and the word “and” which precedes it; b in sub-paragraph (e) for “or a” substitute “, fund of funds scheme or”; c in sub-paragraph (f) after “relevant UCITS ” insert “or Chapter 5 UCITS”; d for sub-paragraphs (g) and (ga) substitute— g qualifying units in or shares of a non-UCITS retail scheme, in circumstances where the units or shares satisfy the condition specified in paragraph (15); . 7 In regulation 7(14) omit “(b),”. 8 For regulation 7(15) substitute— 15 The condition specified in this paragraph is that, judged at the date on which the qualifying investments in question become held in the account (and having regard to the contractual terms and conditions then in existence) the account investor will not be entitled to a secured minimum return at any time falling within the following 5 years.The account investor is entitled to a secured minimum return if— a the contract under which the investments were acquired, or any other transaction entered into by the account investor or any other person, or b the nature of the underlying subject matter of the investments, have the effect that the account investor is not exposed, or not exposed to any significant extent, to the risk of loss from fluctuations in the value of the investments exceeding 5% of the capital consideration paid or payable for the acquisition of those investments. . 9 In regulation 8(2) (qualifying investments for a cash component)— a in sub-paragraph (a) after “Taxes Act” insert “(including for this purpose a credit union)”; b in sub-paragraph (g) omit “(b)” and “, securities”; c add at the end— n arrangements falling within section 47 of the Finance Act 2005 (alternative finance arrangements) under which the person referred to in that section as Y is a financial institution; o arrangements falling within section 49 of that Act. . 10 In regulation 14(2)(b) after paragraph (ii) insert— iia in the case of a credit union, an authorised person within the meaning of section 31(1)(a) of the Financial Services and Markets Act 2000, who has permission to carry on one or more of the activities specified in Article 5 of the Financial Services And Markets Act 2000 (Regulated Activities) Order 2001 ; . 11 In regulation 22(1)(a) (exemption from tax) after paragraph (i) insert— ia in respect of alternative finance return or profit share return paid by a financial institution (within the meanings in Chapter 5 of Part 2 of the Finance Act 2005); . Joan Ryan Tom Watson Two of the Lords Commissioners of Her Majesty’s Treasury 6th December 2005