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The Co-ownership Contractual Schemes (Tax) Regulations 2025

Type Statutory-Instrument

Publication 2025-02-24

State In force

Department King's Printer of Acts of Parliament

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Made: 24th February 2025

Laid before the House of Commons: 25th February 2025

Coming into force: 19th March 2025

The Treasury make these Regulations in exercise of the powers conferred by section 103C of, and paragraph 48 of Schedule 5AAA to, the Taxation of Chargeable Gains Act 1992[^f00001], section 41 of the Finance (No. 2) Act 2017[^f00002] and section 20 of the Finance (No. 2) Act 2024[^f00003].

Part 1 — Preliminary matters

Citation and commencement

1

(1) These Regulations may be cited as the Co-ownership Contractual Schemes (Tax) Regulations 2025.

(2) These Regulations come into force on 19th March 2025.

Part 2 — Reserved Investor Fund (Contractual Schemes): general

Chapter 1 — Interpretation

Interpretation: Part 2

2

(1) In this Part—

“the 2009 Regulations” means the Offshore Funds (Tax) Regulations 2009[^f00004];

“accounting period” has the meaning given by regulation 33;

“depositary”, in relation to a co-ownership scheme, has the meaning given by section 237(2) of FISMA 2000;

“disposal”, in relation to an asset, has the meaning it has in section 21 of TCGA 1992;

“entry notice” has the meaning given by regulation 4 (1);

“exempt investor condition” has the meaning given by regulation 14;

“exit notice” has the meaning given by regulation 22;

“FISMA 2000” means the Financial Services and Markets Act 2000[^f00005];

“genuine diversity of ownership condition” has the meaning given by regulation 7;

“information reporting date”, in relation to an accounting period, means the date 6 months after the end of the accounting period;

“non-close condition” has the meaning given by regulation 8;

“non-UK property assets condition” has the meaning given by regulation 11;

“the operator”, in relation to a co-ownership scheme, has the meaning given by section 237(2) of FISMA 2000 (see paragraph (aa) of that definition)[^f00006];

“ownership requirement” has the meaning given by regulation 5 (4);

“participant”, in relation to a co-ownership scheme, has the meaning given by section 235 of FISMA 2000;

“qualifying conditions” has the meaning given by regulation 5 (3);

“restriction conditions” has the meaning given by regulation 10 (2);

“restriction requirement” has the meaning given by regulation 10 (1);

“UK-based condition” has the meaning given by regulation 6;

“UK property rich condition” has the meaning given by regulation 12.

(2) In this Part, a reference to an asset, or any other interest, of, or belonging to, a co-ownership scheme (however expressed) is a reference to an asset, or any other interest, that is subject to the scheme.

Chapter 2 — Becoming a RIF

Timing: becoming a RIF

3

(1) Where a co-ownership scheme meets, or is treated as meeting, the qualifying conditions on the date specified in the entry notice, the scheme is a RIF from that date.

(2) A co-ownership scheme that is not a scheme to which regulation 28 applies may begin operating as a RIF and will be treated as a RIF for the purposes of these Regulations, providing that—

(a) an entry notice is submitted to HMRC by the operator of the scheme within 3 months of the day on which the scheme began to operate as a RIF, and

(b) subject to any declaration the operator of the scheme intends to make under regulation 9 or 13, the scheme meets the qualifying conditions on the day it begins to operate as a RIF.

Entry notices: general

4

(1) An “entry notice” means a notice given to HMRC by the operator of a co-ownership scheme, setting out—

(a) the name of the scheme,

(b) the date from which the scheme is a RIF,

(i) in the case of a notice in which the date specified for the purposes of sub-paragraph (b) is a date before the submission of the notice, that on that date the scheme met the qualifying conditions and continues to meet those conditions, subject to any declaration under regulation 9 or 13;

(ii) in the case of a notice in which the date specified for the purposes of sub-paragraph (b) is a date on or after the submission of the notice, that the operator of the scheme intends and reasonably expects that on that date the scheme will meet the qualifying conditions, subject to any declaration under regulation 9 or 13,

(d) which one or more restriction conditions are, or will be, met by the scheme, and

(e) a declaration that the operator of the scheme intends and reasonably expects that the scheme will be a RIF until such time as it is wound up or converted to an authorised co-ownership scheme.

(2) An entry notice may be made at any time—

(a) on or before the date specified in the notice for the purposes of paragraph (1)(b), or

(b) before the end of the period of 3 months beginning with that date, providing the scheme is not a scheme to which regulation 28 applies.

(3) An entry notice may not be made in respect of a scheme which has been given a notice in accordance with—

(a) regulation 23,

(b) regulation 24 (1)(a) or (b), unless the information required under regulation 37 has been submitted to HMRC, or

(4) The date included in an entry notice by virtue of paragraph (1)(b) may not be before the day on which these Regulations come into force.

Chapter 3 — Qualifying conditions

Qualifying conditions

5

(1) Paragraph (2) sets out the conditions[^f00007] that a co-ownership scheme must meet in order to be a RIF.

(2) Those conditions are that—

(a) the scheme is UK-based (see regulation 6),

(b) the scheme meets the ownership requirement, and

(3) In these Regulations, the conditions in section 20(1)(a) to (c) of F(No.2)A 2024 and those in paragraph (2) are, together, referred to as the “qualifying conditions”.

(4) The “ownership requirement” is met at any time that the scheme meets either the genuine diversity of ownership condition (see regulation 7) or the non-close condition (see regulation 8).

A UK-based scheme

6

A co-ownership scheme is UK-based if—

(a) the operator and depositary of the scheme are bodies corporate incorporated in the United Kingdom,

(b) the operator and depositary of the scheme both have a place of business in the United Kingdom from where they administer the co-ownership scheme, and

(c) the deed setting out the arrangements which constitute the scheme[^f00008] is made under and governed by the law of England and Wales, Scotland or Northern Ireland and contains a statement to that effect.

Genuine diversity of ownership condition

7

(1) A co-ownership scheme, including one which is part of multi-vehicle arrangements, meets the genuine diversity of ownership condition at any time that the scheme and, where applicable, the arrangements meet—

(a) each of the conditions in regulation 75(2), (3) and (4)(a) of the 2009 Regulations, or

(b) the conditions in regulation 75(5) of those Regulations, and for the purposes of this sub-paragraph the condition in regulation 75(4)(b) is treated as being omitted.

(2) The fact that the capacity of a co-ownership scheme, or multi-vehicle arrangements, to receive investments is limited does not prevent regulation 75(3) of the 2009 Regulations from being met for the purposes of this regulation.

(3) But paragraph (2) does not apply if—

(a) the limited capacity of the co-ownership scheme, or the multi-vehicle arrangements, to receive investments is fixed by the documents of the scheme, or the arrangements or otherwise, and

(b) a pre-determined number of specific persons, or specific groups of connected persons, make investments in the scheme, or the arrangements, that collectively exhausts all, or substantially all, of that capacity.

(4) The 2009 Regulations have effect for the purposes of this paragraph as if references in those Regulations to a fund were references to a co-ownership scheme and included—

(a) references to multi-vehicle arrangements, and

(b) references to a co-ownership scheme which is not an offshore fund.

(5) In this regulation—

(a) the further provisions in regulation 76 of the 2009 regulations apply for the purposes of this regulation;

(b) terms used in both paragraphs (2) and (3) and in regulation 76 of the 2009 Regulations have the meanings they have in that regulation;

(d) “multi-vehicle arrangements” means arrangements comprising two or more collective investment schemes under which an investor in one of those schemes would reasonably regard that investment as an investment in the arrangements as a whole rather than exclusively in any particular scheme.

Non-close condition

8

(1) A co-ownership scheme meets the non-close condition at any time that were it a company—

(a) it would not be a close company in accordance with the rules in Chapter 2 of Part 10 of CTA 2010[^f00009], or

(b) it would be a close company, but only because it has a qualifying investor as a direct participator or indirect participator.

(2) For the purposes of considering whether a co-ownership scheme meets the non-close condition under paragraph (1), the rules in Chapter 2 of Part 10 of CTA 2010 are to be applied as if—

(a) the scheme were a company,

(b) the rights of the participants in the scheme were shares in the company, and

(c) the modifications to the rules set out in paragraphs (a) to (e) of paragraph 46(2) of Schedule 5AAA to TCGA 1992[^f00010] applied, but as if the reference in paragraph (e) to the greater part of the voting power were a reference to 50% or more of the voting power.

(3) In paragraph (1)(b), the following terms have the meaning given by paragraph 46 of Schedule 5AAA to TCGA 1992[^f00011]—

(a) “direct participator”;

(b) “indirect participator”;

Ownership requirement treated as met for initial period

9

(1) A co-ownership scheme that has not previously been a RIF is to be treated for the purposes of these Regulations as meeting the ownership requirement where the entry notice for that scheme—

(a) includes a declaration that the scheme is relying on this regulation,

(b) includes a declaration that the operator of the scheme intends and reasonably expects that the scheme will meet the ownership requirement before the end of a period of 12 months (“the 12 month period”) beginning with the date referred to in regulation 4 (1)(b), and

(c) sets out the steps that the operator of the scheme has taken, or will take, in order to meet that qualifying condition.

(2) A co-ownership scheme may not rely on this regulation after the earlier of—

(a) the end of the 12 month period,

(b) the beginning of the day on which it becomes apparent to the operator of the scheme that there is no reasonable expectation of the scheme meeting the ownership requirement within the 12 month period, or

(3) Where paragraph (2)(b) applies, the operator of the scheme must notify HMRC of that fact within a period of 30 days, beginning with the day on which that paragraph applies.

Restriction requirement

10

(1) A co-ownership scheme meets the restriction requirement at any time when it meets one or more of the restriction conditions.

(2) The “restriction conditions” are—

(a) the non-UK property assets condition (see regulation 11);

(b) the UK property rich condition (see regulation 12);

Non-UK property assets condition

11

(1) A co-ownership scheme meets the non-UK property assets condition if—

(a) it has no assets which are interests in UK land, and

(b) it has no assets that derive 75% or more of their value from UK land, ignoring an asset falling within paragraph (2).

(2) An asset falls within this paragraph if—

(a) it is held by a scheme which meets the non-UK real estate condition,

(b) it is an interest or right in a collective investment vehicle which—

(i) is a company, or is assumed to be a company under paragraph 4 of Schedule 5AAA to TCGA 1992 for the purposes of that Schedule, and

(ii) is UK property rich, and

(3) A scheme meets the non-UK real estate condition at any time if, by reference to the prospectus for the scheme as it has effect at that time, less than 10% of the expected market value of the scheme’s investments is intended to be derived from investments consisting of rights or interests in companies which are UK property rich.

(4) Part 2 of Schedule 1A to TCGA 1992[^f00012] applies for the purpose of determining whether a co-ownership scheme has an asset that derives 75% or more of its value from UK land for the purposes of paragraph (1)(b), but for those purposes references to the time of the disposal are to be read as if they were references to the time at which the determination is being made.

(5) In determining for the purposes of paragraph (2)(c) whether an interest or right constitutes a 10% investment in a vehicle, the rule in paragraph 9 of Schedule 1A to TCGA 1992 is to be applied, but for this purpose—

(a) paragraph 10 of that Schedule is to be ignored, and

(b) references to 25% are to be taken as references to 10%.

(6) In this regulation—

(a) “collective investment vehicle” has the meaning given by paragraph 1 of Schedule 5AAA to TCGA 1992[^f00013];

(b) “prospectus”, in relation to a scheme, means any document (however described) which is made available to participants or potential participants and which sets out descriptions of the investments to be made, or intended to be made, by the scheme;

UK property rich condition

12

(1) A co-ownership scheme meets the UK property rich condition—

(a) if it is UK property rich for the purposes of Schedule 5AAA to TCGA 1992, and

(b) if the scheme relies on meeting the non-close condition for the purposes of qualifying as a RIF, it also meets the UK tax condition.

(2) A co-ownership scheme meets the UK tax condition if, were it a company, it would meet the UK tax condition in paragraph 13(7) of Schedule 5AAA to TCGA 1992, applying those rules as if—

(a) the scheme were a company, and

(b) the rights of participants in the scheme were shares in the company.

UK property rich condition treated as met for initial period

13

(1) A co-ownership scheme that does not fall within paragraph (5) is to be treated for the purposes of these Regulations as meeting the UK property rich condition where the entry notice for that scheme—

(a) includes a declaration that the scheme is relying on this regulation,

(b) includes a declaration that the operator of the scheme intends and reasonably expects that the scheme will meet that condition before the end of a period of 12 months (“the 12 month period”) beginning with the date referred to in regulation 4 (1)(b), and

(2) A co-ownership scheme may not rely on this regulation after the earlier of—

(a) the end of the 12 month period,

(b) the beginning of the day on which it becomes apparent to the operator of the scheme that there is no reasonable expectation of the RIF meeting the UK property rich condition within the 12 month period, or

(3) Where paragraph (2)(b) applies, the operator of the scheme must notify HMRC of that fact within a period of 30 days, beginning with the day on which that paragraph applies.

(4) This regulation is treated as having never applied in relation to the scheme if a prohibited repayment of capital is made to a participant in the scheme at a time—

(a) which is within the 12 month period, and

(b) when, ignoring this regulation, the scheme would not meet the UK property rich condition.

(5) A co-ownership scheme falls within this paragraph if the scheme—

(a) has previously been a RIF,

(b) has previously been an authorised contractual scheme, or

(6) In paragraph (4), a “prohibited repayment of capital” means a payment, or accrual of an entitlement to a payment, from the assets of the scheme—

(a) which represents, in substance, value derived (directly or indirectly) from a direct disposal of UK land or from the UK land component of an indirect disposal of UK land,

(b) the amount of which does not fall to be taken into account for the purposes of income tax or corporation tax on income, and

(c) some or all of the value which is represented by the amount does not fall to be taken into account for the purposes of income tax or corporation tax on income.

(7) In paragraph (6)—

(a) “direct disposal of UK land” and “indirect disposal of UK land” have the meanings given by paragraph 47(2) of Schedule 5AAA to TCGA 1992[^f00015];

(b) “the UK land component” has the meaning given by paragraph 21(4) of Schedule 5AAA to TCGA 1992.

Exempt investor condition

14

(1) A co-ownership scheme meets the exempt investor condition at any time that all of its participants are exempt from tax on gains.

(2) A participant is exempt from tax on gains if—

(a) any gain accruing in the event of a disposal of the participant’s units would be wholly exempt from capital gains tax or corporation tax (otherwise than by reason of residence), or

(b) the participant holds all of their units pending disposal in their capacity as operator of the scheme.

(3) For the purposes of paragraph (2)(a), no account is to be taken of the possibility of a charge to corporation tax on income in respect of a gain accruing on a disposal of a unit by an insurance company, or a friendly society, where throughout the time that the company or society holds the unit—

(a) the company, or society, carries on life assurance business and the unit is an asset which, applying the rules in section 138 of FA 2012[^f00016], is wholly matched to a liability of that business that is not BLAGAB, or

(b) the company, or society, carries on long-term business none of which is BLAGAB and the unit is an asset held for the purposes of that business.

(4) In paragraph (3)—

(a) the following terms have the meaning they have in Part 2 of FA 2012[^f00017]—

(i) “insurance company”;

(ii) “life assurance business”;

(iii) “long-term business”;

(iv) “BLAGAB”;

(b) “friendly society” has the meaning it has in section 172(1) of that Act.

Chapter 4 — Changes in qualifying conditions and breaches of qualifying conditions

Change in restriction conditions met

15

(1) The operator of a RIF must notify the participants in the RIF and HMRC if there is a change in which of the restriction conditions the RIF relies on meeting within a period of 30 days beginning with the day on which the change occurs.

(2) Paragraph (3) applies where—

(a) a co-ownership scheme’s status as a RIF depends on it meeting the UK property rich condition,

(b) the scheme ceases to meet that condition, and

(3) Each participant in the RIF is deemed for the purposes of TCGA 1992 to, immediately before the RIF ceases to meet the UK property rich condition, have—

(a) sold their units in the RIF, and

(b) reacquired those units,

at their market value at that time.

(4) The operator of a RIF must notify each participant in the RIF of any deemed disposal of the participant’s units in the RIF under paragraph (3) within the period of 30 days beginning with the day on which the RIF ceased to meet the UK property rich condition.

Breach of ownership requirement: opportunity to rectify etc

16

(1) Where a RIF breaches the ownership requirement it will be treated for the purposes of these Regulations as if it continued to meet that requirement until the earlier of—

(a) the end of a period of 9 months (“the 9 month period”), beginning with the day on which the breach occurred, or

(b) the beginning of the day on which it becomes apparent to the operator of the RIF that there is no reasonable expectation of the RIF rectifying the breach by the end of the 9 month period.

(2) Where paragraph (1)(b) applies, the operator of the RIF must notify HMRC of that fact within the period of 30 days, beginning with the day on which that paragraph applies.

(3) Paragraph (4) applies where the breach is rectified—

(a) before the end of the 9 month period, but

(b) more than 30 days after the date on which the breach occurred.

(4) Where this paragraph applies, each participant in the RIF is deemed for the purposes of TCGA 1992 to, immediately before the time of the breach, have—

(a) sold their units in the RIF, and

(b) reacquired those units,

at their market value at that time.

(5) The operator of the RIF must notify each participant in the RIF of any deemed disposal of the participant’s units in the RIF under paragraph (4) within the period of 30 days, beginning with the day the breach was rectified.

Multiple breaches of ownership requirement within 12 month period

17

Where a RIF breaches the ownership requirement five or more times in any period of 12 months, regulation 16 applies in relation to the fifth breach, and to any further breach in that period, as if sub-paragraph (b) of paragraph (3) were omitted.

Breach of restriction requirement: opportunity to rectify etc

18

(1) This regulation applies where—

(a) a RIF breaches the restriction requirement, and

(b) regulation 19 does not apply.

(2) The RIF will be treated for the purposes of these Regulations as if it continued to meet the restriction requirement until the earlier of—

(a) the end of a period of 9 months (“the 9 month period”) beginning with the day on which the breach occurred, or

(b) the beginning of the day on which it becomes apparent to the operator of the RIF that there is no reasonable expectation of the RIF rectifying the breach by the end of the 9 month period.

(3) Where paragraph (2)(b) applies, the operator of the RIF must notify HMRC of that fact within a period of 30 days, beginning with the day on which it applies.

(4) Where the RIF rectifies the breach by the end of the 9 month period, each participant in the RIF is deemed for the purposes of TCGA 1992 to, immediately before the time of the breach, have—

(a) sold their units in the RIF, and

(b) reacquired those units,

at their market value at that time.

(5) The operator of the RIF must notify each participant in the RIF of any deemed disposal of the participant’s units in the RIF under paragraph (4) within the period of 30 days beginning with the day on which the breach was rectified.

(6) Where the breach of the restriction requirement is by virtue of the RIF ceasing to meet the exempt investor condition and the operator of the RIF has taken reasonable steps to monitor compliance with that condition, this regulation applies as if “the 9 month period” meant the period of 9 months beginning with the day on which the operator of the RIF first became aware of the breach.

Winding up of a RIF that is UK property rich

19

(1) This regulation applies where—

(a) a RIF ceases to meet the UK property rich condition at a time when the operator of the RIF is taking steps with a view to disposal of all the assets of the RIF so that it can be wound up, and

(b) the RIF does not meet any of the other restriction conditions.

(2) Each participant in the RIF is deemed, for the purposes of TCGA 1992 to, immediately before the time that the RIF ceases to meet the UK property rich condition, have—

(a) sold their units in the RIF, and

(b) reacquired those units,

at their market value at that time.

(3) The operator of the RIF must notify the participants in the RIF of any deemed disposal of their units in the RIF under paragraph (2) within the period of 30 days beginning with the day on which the RIF ceased to meet the UK property rich condition.

(4) For the purposes of these Regulations the RIF is otherwise to be treated as if it continued to meet the UK property rich condition for a period (“the winding up period”) of two years beginning with the day on which the RIF ceased to meet the UK property rich condition, and including any extension of that period under this regulation.

(5) The winding up period may be extended where the operator of the RIF makes an application to HMRC which must—

(a) be made no earlier than 60 days, and no later than 30 days, before the end of the winding up period,

(b) set out the further period for which the winding up period should be extended, and

(6) The application will be treated as granted unless an officer of HMRC gives a notice (“a refusal notice”) to the operator of the RIF within a period of 30 days, beginning with the day on which the application was received by HMRC.

(7) A refusal notice must give the officer’s reasons for the decision and may—

(a) refuse to extend the winding up period, or

(b) agree to such extension of the winding up period as the officer thinks is reasonable.

(8) The operator of a RIF may bring an appeal against a refusal notice.

(9) The appeal must be made by notice given to HMRC within the period of 30 days beginning with the day on which the refusal notice was given to the operator of the RIF.

(10) Where a notice is given to HMRC, the winding up period is treated as continuing until the appeal is determined or withdrawn.

(11) On an appeal that is notified to the tribunal, the tribunal must determine whether it was just and reasonable for the officer to give the refusal notice.

(12) The tribunal may affirm, vary or quash the notice.

Chapter 5 — Ceasing to be a RIF

Causes and timing

20

Where a RIF ceases to be a RIF by virtue of ceasing to meet one or more of the qualifying conditions, the RIF ceases to be a RIF from the beginning of the first day on which it ceases to meet one or more of those conditions.

Breach of qualifying conditions: requirement to notify HMRC

21

(1) Where a RIF breaches one or more qualifying conditions and as a result ceases to be a RIF, the operator of the RIF must notify HMRC in accordance with this regulation.

(2) Notice in respect of a breach of a qualifying condition in section 20(1)(a) to (c) of F(No.2)A 2024 or the UK-based condition must specify—

(a) the qualifying condition that the RIF has breached, and

(b) the date on which the breach occurred.

(3) Notice in respect of a breach of the ownership requirement or restriction requirement must specify—

(a) if the ownership requirement was breached, whether the RIF ceased to meet the genuine diversity of ownership condition or the non-close condition,

(b) if the restriction requirement was breached, the restriction condition that the RIF ceased to meet, and

(4) A notice under this regulation must be given before the end of the period of 30 days beginning—

(a) in respect of a breach mentioned in paragraph (2), with the date on which the breach occurred,

(b) in respect of a breach mentioned in paragraph (3), with the date on which the 9 month period in relation to the breach came to an end.

(5) The operator of a RIF is not required to give notice in respect of a breach of a qualifying condition if, in relation to the breach, the operator has given a notice under regulation 9 (3), 13 (3), 16 (2) or 18 (3).

(6) In paragraph (4), “9 month period”—

(a) in relation to a breach of the ownership requirement, has the meaning it has in regulation 16;

(b) in relation to a breach of the restriction requirement, has the meaning it has in regulation 18.

Exit notices

22

(1) The operator of a RIF may give an exit notice for the purpose of the scheme ceasing to be a RIF.

(2) An “exit notice” means a notice given to HMRC setting out—

(a) the date from which the scheme is to be treated as having ceased to be, or will cease to be, a RIF, and

(b) the reasons for the operator of the RIF’s decision that the scheme is to be treated as having ceased to be, or will cease to be, a RIF.

(3) An exit notice may be made at any time—

(a) prior to the date specified in the notice for the purposes of paragraph (2)(a), or

(b) before the end of the period of 3 months beginning with that date.

(4) The RIF will cease to be, or be treated as having ceased to be, a RIF from the beginning of the date specified in the exit notice.

Relevant declarations in entry notice

23

(1) This regulation applies where—

(a) a RIF ceases to be a RIF as a result of ceasing to meet a qualifying condition or an exit notice being given in relation to the scheme, and

(b) the RIF has been a RIF for a continuous period of less than two years at the time that it ceases to be a RIF.

(2) A designated HMRC officer must determine that the RIF is to be treated as if the entry notice had never been given in relation to it where—

(a) a relevant declaration was made by an operator of a RIF in the entry notice given in relation to the RIF, and

(b) the designated HMRC officer has reasonable grounds to believe that the operator of the RIF—

(i) did not have the intention referred to in the declaration, or

(ii) could not reasonably have had the expectation referred to in the declaration.

(3) Where a determination under paragraph (2) is made, this does not affect any penalties imposed under regulation 40.

(4) Where a determination under paragraph (2) is made for a scheme to which regulation 28 applied—

(a) the determination does not affect any land transaction treated as occurring under that regulation,

(b) a land transaction which is the acquisition of chargeable interests by the participants in the scheme from the scheme is treated as occurring on the date the determination was made,

(c) any consideration in respect of the land transaction is disregarded for the purposes of paragraph 1 of Schedule 4 to FA 2003[^f00018],

(d) paragraph 8 of Schedule 4 to FA 2003[^f00019] does not apply to the land transaction, and

(e) the land transaction is not a notifiable transaction within the meaning given by section 77 FA 2003[^f00020].

(5) A determination under paragraph (2) must be made by notice given by the designated HMRC officer to the operator of the RIF.

(6) A notice under paragraph (5) must include—

(a) the date of the determination, and

(b) the reasons for the determination.

(7) The operator of the RIF must notify each participant in the RIF of any determination under paragraph (2) within the period of 30 days beginning with the day on which the notice under paragraph (5) was given to the operator.

(8) The operator of the RIF may bring an appeal against a determination under paragraph (2).

(9) The appeal must be made by notice given to HMRC within the period of 30 days beginning with the day on which the notice of the determination was given to the operator of the RIF.

(10) Where a notice is given to HMRC, the scheme is to be treated as if the determination under paragraph (2) had not been made until the appeal is determined or withdrawn.

(11) On an appeal that is notified to the tribunal, the tribunal must determine whether the designated HMRC officer had reasonable grounds to make the determination.

(12) The tribunal may affirm or quash the determination.

(13) In this regulation—

“chargeable interests” has the meaning given by regulation 28 (6)(a);

“designated HMRC officer” means an officer of HMRC who has been designated by the Commissioners for HMRC for the purposes of this regulation;

“relevant declaration” means a declaration under regulation 4 (1)(e), 9 (1)(b) or 13 (1)(b).

Cessation notice

24

(1) A notice (“a cessation notice”) must be given to the operator of a RIF by—

(a) an officer of HMRC if the operator of the RIF fails, without reasonable excuse, to provide information required under regulation 37 to HMRC before the end of a period of 6 months (“the 6 month period”) beginning with the day after the information reporting date,

(b) an officer of HMRC if the operator of the RIF provides information required under regulation 37 to HMRC within the 6 month period, but—

(i) the operator does not have a reasonable excuse for failing to provide the information on or before the information reporting date, and

(ii) the operator previously committed a minor breach of regulation 37,

(i) the operator of the RIF fails to provide information required by a notice under regulation 38 to HMRC before the last day of the period of time specified for the purposes of that regulation, and

(ii) there has been no successful appeal against the notice.

(d) a designated HMRC officer, if the officer determines that it is reasonable to do so in order to safeguard the public revenue, or

(e) an officer of HMRC, if the officer of HMRC determines that a RIF has breached one or more qualifying conditions and the operator of the RIF has not given a notice under regulation 9 (3), 13 (3), 16 (2), 18 (3) or 21.

(2) A cessation notice must specify—

(a) the grounds for giving the notice, and

(b) for a notice given under paragraph (1)(d) or (e), the day from which the RIF is no longer a RIF, which may be a day earlier than the notice.

(3) Where a cessation notice is given under—

(a) paragraph (1)(a), (b) or (c) the RIF ceases to be a RIF from the beginning of the day on which the notice is given to the operator of the RIF;

(b) paragraph (1)(d) or (e), the RIF ceases to be a RIF from the beginning of the day specified in the notice.

(4) But a cessation notice under paragraph (1)(e) may not specify a day earlier than the first day of a period of 12 months ending with the date on which the notice was given.

(5) The operator of the scheme may bring an appeal against a cessation notice given under paragraph (1)(a), (b), (d) or (e) by giving a notice to HMRC within the period of 30 days beginning with the day on which the notice was given to the operator.

(6) Where a notice is given to HMRC, the RIF is to be treated as if the cessation notice had not been given until the appeal is determined or withdrawn.

(7) On an appeal that is notified to the tribunal, the tribunal must determine—

(a) for an appeal against a cessation notice given under paragraph (1)(a) or (b), whether the operator of the RIF had a reasonable excuse for the failure to provide required information;

(b) for an appeal against a cessation notice given under paragraph (1)(d), whether it was reasonable for the officer of HMRC to give the notice in order to safeguard the public revenue;

(c) for an appeal against a cessation notice given under paragraph (1)(e), whether the RIF has breached one or more of the qualifying conditions.

(8) The tribunal may affirm, vary or quash the cessation notice.

(9) In this paragraph—

“designated HMRC officer” means an officer of HMRC who has been designated by the Commissioners for HMRC for the purpose of giving cessation notices under paragraph (1)(d) of this regulation;

“minor breach” means that information required under regulation 37 was provided within the 6 month period.

Ceasing to be a RIF: deemed disposal of units

25

(1) At any time that a RIF ceases to be a RIF, each participant in the RIF is deemed, for the purposes of TCGA 1992, to, immediately before that time, have—

(a) sold their units in the RIF, and

(b) reacquired those units,

at their market value at that time.

(2) But paragraph (1) does not apply to a RIF that meets the restriction condition in regulation 10 (2)(a) or (c) and becomes an authorised co-ownership scheme.

(3) The operator of a RIF must notify each participant in the RIF of any deemed disposal of the participant’s units under paragraph (1).

(4) Notice under paragraph (3) must be given by the end of the period of 30 days beginning with the later of—

(a) the day on which the scheme ceases to be a RIF, or

(b) the day on which a notice is given to the operator of the RIF by HMRC in accordance with regulation 24 (1).

Gains accruing on deemed disposals

26

(1) This regulation applies if a disposal of units in a RIF is deemed to have been made by a person at any time under regulations 15 (3), 16 (4), 18 (4), 19 (2) or, where the disposal has occurred because the RIF ceased to meet one or more of the qualifying conditions, 25 (1).

(2) Any gain (“the deemed gain”) accruing to the person on the deemed disposal is treated as accruing to the person in accordance with this regulation.

(3) If, at the time of the deemed disposal or a subsequent time, the person actually disposes of a unit in the scheme, the appropriate portion of the deemed gain is treated as accruing to the person at the time of the actual disposal.

(4) For this purpose “the appropriate portion” means the proportion which the consideration for the actual disposal bears to the amount of the deemed gain.

(5) If some of the deemed gain has accrued on one or more previous occasions, the appropriate portion is restricted so that, when added to the appropriate portion or portions on the previous occasion or occasions, it does not exceed 100%.

(6) In determining the appropriate proportion, so much, if any, of the consideration for the actual disposal as exceeds the amount of the deemed gain is to be ignored.

(7) The remainder of the deemed gain is treated as accruing to the person (unless the whole amount has already accrued)—

(a) where there is a deemed disposal under regulations 16 (4), 18 (4) or 19 (2) at the earlier of—

(i) the RIF being wound up, or

(ii) the date in the exit notice given in relation to the RIF;

(b) where there is a deemed disposal under regulations 15 (3) or, where the disposal has occurred because the RIF ceased to meet one or more of the qualifying conditions, 25 (1) the earlier of—

(i) the end of the period of three years beginning with the time of the deemed disposal,

(ii) the RIF being wound up, or

(iii) the date in the exit notice given in relation to the RIF.

Chapter 6 — SDLT consequences of becoming and ceasing to be a RIF

Interpretation of this Chapter

27

In this Chapter—

(a) “eligible co-ownership scheme” has the meaning given by regulation 29 (1);

(b) “unauthorised contractual scheme” means a co-ownership scheme that is—

(i) not authorised for the purposes of FISMA 2000 by an authorisation order in force under section 261D(1) of that Act[^f00021],

(ii) not a RIF, and

(iii) not an eligible co-ownership scheme;

(c) where an expression in this Chapter is defined in Part 4 of FA 2003 (stamp duty land tax)[^f00022], it has the meaning given by that Part.

Land transaction upon unauthorised contractual scheme becoming a RIF

28

(1) For the purposes of Part 4 of FA 2003, a land transaction is to be treated as having occurred at any time that an unauthorised contractual scheme with chargeable interests becomes a RIF.

(2) In such a case—

(a) the land transaction is the acquisition of chargeable interests by the RIF from the participants in the scheme,

(b) the effective date of the transaction is the date specified in the entry notice in relation to the RIF under regulation 4 (1)(b),

(c) the chargeable consideration in respect of the transaction is the market value of the chargeable interests on that date, subject to the rest of this regulation, and

(d) paragraph 14 of Schedule 15 to FA 2003[^f00023] will not apply to the land transaction.

(3) Paragraphs (4) and (5) apply in relation to cases where a RIF has previously been, and then ceased to be, a RIF before becoming a RIF as described in paragraph (1).

(4) If between the time at which the scheme becomes an unauthorised contractual scheme and the effective date of the land transaction mentioned in paragraph (1)—

(a) the scheme has not acquired any chargeable interests, and

(b) there has been no change to the participants in the scheme during that time,

there is no chargeable consideration in respect of the land transaction.

(5) If between the time that the scheme becomes an unauthorised contractual scheme and the effective date of the land transaction mentioned in paragraph (1)—

(a) the scheme has acquired chargeable interests, and

(b) there has been no change to the participants in the scheme,

the chargeable consideration in respect of the land transaction is the market value on the effective date of those chargeable interests acquired.

(6) For the purposes of this regulation—

(a) the definition of “chargeable interests” in section 48 of FA 2003[^f00024] is to be read as if it included an interest (a “PIP interest”) in a property investment partnership within the meaning of paragraph 14(8) of Schedule 15 to that Act, and

(b) the market value of a PIP interest is to be calculated in accordance with paragraph (7) as at the time immediately before the land transaction is treated as occurring under paragraph (1).

(7) The market value of a PIP interest is to be calculated by the following steps:

Step 1 Calculate the partnership share represented by the PIP interest in accordance with paragraph 34(2) of Schedule 15 to FA 2003.

Step 2 Calculate the market value of the chargeable interests held at that time by or on behalf of the property investment partnership, or the members of the partnership, for the purposes of the partnership business,

Step 3 The market value of the PIP interest is the partnership share (calculated under step 1) of the market value of the chargeable interests (calculated under step 2).

Application of Part 4 of FA 2003 to a RIF that ceases to be a RIF and becomes an eligible co-ownership scheme

29

(1) An “eligible co-ownership scheme” means a co-ownership scheme which—

(a) has ceased to be a RIF as a result of ceasing to meet a qualifying condition, but

(b) continues to—

(i) be UK-based (see regulation 6),

(ii) be an AIF, as defined by regulation 3 of the Alternative Investment Fund Managers Regulations 2013[^f00025],

(iii) meet the conditions set out in section 261E(2) and (3) of FISMA 2000[^f00026], and

(iv) not be an authorised co-ownership scheme.

(2) Part 4 of FA 2003 applies in relation to an eligible co-ownership scheme as if—

(a) the scheme were a company, and

(b) the rights of the participants were shares in the company.

(3) For the purposes of Part 5 of Schedule 9A to FA 2003[^f00027], an eligible co-ownership scheme is not “non-resident” in relation to any chargeable transaction.

(4) Paragraphs (2) and (3) apply in relation to an eligible co-ownership scheme from the time that the scheme ceases to be a RIF until the earliest of the scheme—

(a) becoming a RIF,

(b) being wound up, or

(5) If an eligible co-ownership scheme is an eligible umbrella scheme then Part 4 of FA 2003 applies in relation to the scheme as it applies in relation to an umbrella scheme which is a co-ownership contractual scheme within the meaning of section 102A(2A) of FA 2003[^f00028].

(6) An eligible co-ownership scheme is an eligible umbrella scheme if it meets the conditions set out in paragraphs (a) and (b) of subsection (3) of section 102A of FA 2003.

Land transaction upon RIF or eligible co-ownership scheme becoming unauthorised contractual scheme

30

(1) For the purposes of Part 4 of FA 2003, a land transaction is to be treated as having occurred at any time that a RIF, or an eligible co-ownership scheme, becomes an unauthorised contractual scheme.

(2) In such a case—

(a) the land transaction is the acquisition of the chargeable interests of the scheme by the participants in the scheme, and

(b) the effective date of the transaction is the date on which the scheme ceases to be a RIF or an eligible co-ownership scheme and becomes an unauthorised contractual scheme.

(3) Paragraphs (6) and (7) of regulation 28 apply for the purposes of this regulation as if the reference in paragraph (6)(b) to “paragraph (1)” was a reference to paragraph (1) of this regulation.

Withdrawal of seeding relief: application to postpone payment of tax where appeal against relevant decisions

31

(1) This regulation applies where—

(a) as a result of a relevant decision, relief from stamp duty land tax under paragraph 13 of Schedule 7A to FA 2003 (co-ownership scheme seeding relief)[^f00029] is withdrawn in relation to a RIF, and

(b) the operator of the RIF appeals against the relevant decision.

(2) The operator of the RIF may apply by notice to HMRC to postpone the payment of tax chargeable as a result of the withdrawal of relief pending the determination of the appeal.

(3) An application under paragraph (2) must—

(a) be made before the end of the period for filing the further return required under section 81(1)(bb) of FA 2003[^f00030] in respect of the withdrawal of relief (“the further return”), and

(b) include—

(i) the date, and any reference number, of the notice of the relevant decision,

(ii) the date that the appeal against the relevant decision was made, and

(iii) if the return has been filed, a copy of the further return.

(4) Paragraph 39(5), (7) and (8) and paragraph 40 of Schedule 10 to FA 2003[^f00031] apply to an application to postpone the payment of tax under paragraph (2) as they apply in relation to an application to postpone the payment of tax under paragraph 39(1)[^f00032] of that Schedule, as if the references to an appeal in paragraphs 39(8) and 40 were references to an appeal within the meaning of this regulation.

(5) In this regulation—

“appeal” means— in relation to a relevant decision which is a determination under regulation 23, an appeal under that regulation; in relation to a relevant decision which is a decision under regulation 24, an appeal under that regulation.

“relevant decision” means— a determination under regulation 23 that a RIF is to be treated as if an entry notice had never been given in relation to it; a decision under regulation 24 to give a cessation notice to the operator of a RIF.

Determination of application under regulation 31 and referral to tribunal

32

(1) HMRC must determine an application under regulation 31 and notify the applicant of their decision before the end of the period of 30 days—

(a) beginning with the day on which the application was made, or

(b) if, in relation to the application, one or more notices have been given under Schedule 36 to FA 2008[^f00033], beginning with the last day on which information must be provided under the last notice given.

(2) Any notice given under Schedule 36 to FA 2008 requiring further information in relation to the application must allow the operator at least 30 days from the date of issue of the notice to comply with it.

(3) An application may be refused by HMRC if—

(a) the conditions for making the application set out in regulation 31 (1) are not met,

(b) the application does not comply with the requirements set out in regulation 31 (3),

(d) information in respect of the application required to be provided by a notice under Schedule 36 to FA 2008 is not provided within the time specified, or

(e) there are tax avoidance arrangements in relation to the transactions to which the withdrawal of seeding relief applies.

(4) Where the application is refused, the notice must set out—

(a) the grounds for the refusal, and

(b) the date by when the tax must be paid.

(5) Where an application is refused, the operator may refer the application for postponement to the tribunal within the period of 30 days beginning with the date of the document notifying HMRC’s decision on the application.

(6) For the purposes of paragraph (3)(e), “arrangements” are tax avoidance arrangements in relation to a transaction if their main object, or one of their main objects, is the avoidance of liability to stamp duty land tax, and “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.

Chapter 7 — Accounts

Beginning and end of accounting period

33

(1) An accounting period of a RIF begins—

(a) on the date on which the scheme becomes, or is treated as having become, a RIF, or

(b) immediately after the end of the previous accounting period of the RIF.

(2) An accounting period of a RIF comes to an end on the first occurrence of any of the following—

(a) the date to which the scheme makes up its accounts,

(b) the end of the period of 18 months beginning with the day on which the accounting period began, or

Preparation of accounts

34

The accounts of a RIF for an accounting period must be—

(a) prepared in accordance with the Investment Association’s Statement of Recommended Practice for the Financial Statements of Authorised Funds published in May 2014, as amended from time to time (or any successor statement of recommended practice)[^f00034], or its principles so far as they relate to determining revenue and capital, and

(b) audited as being so prepared by a person who—

(i) is eligible for appointment as a statutory auditor under Part 42 of the Companies Act 2006 (statutory auditors)[^f00035], and

(ii) if appointed as a statutory auditor, would not be prohibited from acting by section 1214 of that Act (independence requirement).

Chapter 8 — Information requirements

Information to be provided to participants

35

(1) The operator of a RIF must in relation to each accounting period provide sufficient information to participants in the scheme to enable those participants to meet their tax obligations in the United Kingdom with respect to their interests in the scheme.

(2) The information provided must include details of any additional income treated as paid to participants on the information reporting date.

(3) The information must be provided on or before the information reporting date in relation to the accounting period in which the requirement for the information arose.

Information to be provided to other RIF or authorised co-ownership scheme

36

(1) This regulation applies where an investment is made for the purposes of a RIF or authorised co-ownership scheme (the “investor scheme”) through a different RIF (the “investee scheme”).

(2) The operator of the investee scheme must in relation to each accounting period provide sufficient information to the operator of the investor scheme to enable that operator to meet its obligations under—

(a) regulation 35, where the investor scheme is a RIF, or

(b) regulation 4 of the Co-ownership Authorised Contractual Schemes (Tax) Regulations 2017[^f00036], where the investor scheme is an authorised co-ownership scheme.

(3) The information must be provided on or before the information reporting date.

Information to be provided to HMRC

37

(1) This regulation sets out the information which the operator of a RIF must provide to HMRC on or before the information reporting date in relation to each accounting period of the RIF.

(2) The operator must provide—

(a) the names and addresses of all the participants in the scheme;

(b) the number and classes of units held in the scheme by each participant at the end of the accounting period;

(d) any restriction conditions the RIF met during the accounting period.

(3) Where there is a deemed disposal under regulation 15 (3), the operator must additionally provide the date of the deemed disposal to HMRC.

(4) Where regulation 16 or 18 applies, the operator must additionally provide—

(a) details of which qualifying condition was breached,

(b) the date on which the breach occurred,

(d) the date of any deemed disposal under regulation 16 (4) or 18 (4).

(5) The operator of a RIF which met, or was treated as meeting, the UK property rich condition for all or any part of the accounting period must additionally provide—

(a) the total value of all disposals of assets made by the RIF at any time when it met the UK property rich condition during the period;

(b) the amount of the total difference between the gains and losses relating to the disposal of those assets computed in accordance with Part 2 of TCGA 1992;

(i) the number of units in the RIF that the participant has disposed of during the period;

(ii) if the information is available to the operator, the value of those disposals, and

(iii) if the information is available to the operator, the difference between the gains and losses made by the participant on those disposals computed in accordance with Part 2 of TCGA 1992.

(6) The operator of a RIF which meets the exempt investor condition must additionally provide—

(a) confirmation that all the participants in the RIF are, for that period, exempt from tax on gains (within the meaning of regulation 14), and

(b) confirmation that the operator has taken reasonable steps during the period to monitor their exemption.

(7) Where regulation 19 applies, the operator of a RIF must additionally provide—

(a) confirmation that regulation 19 applies, and

(b) the date on which the winding up period referred to in regulation 19 is expected to end.

Further information to be provided to HMRC

38

(1) An officer of HMRC may by notice require the operator of a RIF to provide HMRC with—

(a) any information that the operator provided to the participants in the RIF at any time within 5 years prior to the notice being given;

(b) any information or documents the operator holds, or can obtain, that HMRC reasonably requires for the purposes of determining whether the RIF has met, or continues to meet, the qualifying conditions.

(2) The notice must specify that the information be provided within such period as the officer of HMRC considers reasonable, which must not be less than the period of 42 days beginning with the date on which the notice was issued.

(3) An officer of HMRC may by notice extend the period where the officer considers it is reasonable to do so.

(4) Where a notice under paragraph (1)(b) requests information or documents that relate only to an accounting period in respect of which information has been required to be reported to HMRC under regulation 37 (1), the notice must be given to the operator of the RIF within a period of 12 months beginning with the information reporting date for that accounting period.

(5) The operator of the RIF may bring an appeal against—

(a) the requirement for information or documents specified in a notice under paragraph (1)(b);

(b) the amount of time given to provide the information in accordance with paragraph (2).

(6) The appeal must be made by notice given to HMRC within the period of 30 days beginning with the date on which the notice under paragraph (1) was issued.

(7) Where a notice is given to HMRC, the RIF is to be treated as if the notice under paragraph (1) had not been given until the appeal is determined or withdrawn.

(8) On an appeal that is notified to the tribunal, the tribunal must determine, as appropriate—

(a) whether it was just and reasonable for the officer of HMRC to require information under paragraph (1)(b);

(b) whether the amount of time given to provide the information under paragraph (2) was just and reasonable.

(9) The tribunal may vary, affirm or cancel the notice.

Chapter 9 — Further provision about notices, information and applications

Further provision about notices, information and applications

39

(1) A notice under these regulations is to be given in writing and HMRC may publish a notice in such manner as HMRC consider appropriate making further provision about—

(a) the content of notices given, and applications made, to HMRC under this Part, and

(b) the form and manner in which notices and information are to be given, and applications are to be made, to HMRC under this Part

(2) A notice published by HMRC under these Regulations may make different provision for different cases or different purposes.

Chapter 10 — Penalties for failure to give information or notice

Penalties for failure to give information or notice

40

(1) The operator of a RIF who fails, without reasonable excuse, to ensure that the accounts of the RIF are prepared in accordance with regulation 34 is liable to a penalty not exceeding £3,000.

(2) The operator of a RIF who fails, without reasonable excuse, to comply with a requirement to give information under regulation 35, 36 or 37 is liable to a penalty of £100 in respect of each failure.

(3) But in respect of multiple failures in connection with the same accounting period, the total amount of penalties imposed on an operator under paragraph (2) must not exceed £1,000.

(4) The operator of a RIF who fails, without reasonable excuse, to comply with a requirement to give information under regulation 38 is liable to a penalty not exceeding £3,000.

(5) The operator of a RIF who fails, without reasonable excuse, to comply with a requirement to give a notice under this Part is liable to a penalty not exceeding £3,000.

Chapter 11 — Umbrella schemes: modification of this Part

Umbrella schemes: general

41

(1) This Part applies in relation to umbrella co-ownership schemes and umbrella RIFs with the modifications set out in this Chapter.

(2) In this Chapter—

“sub-scheme” in relation to an umbrella co-ownership scheme or an umbrella RIF, means the arrangements constituting the scheme or RIF so far as they relate to a separate pool of property, and references to participants in relation to a sub-scheme are references to participants in those arrangements;

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