CG73997V - UK property rich collective investment vehicles: Transparency election: How and when the transparency election must be made

The election must be made by the fund manager (TCGA92/SCH5AAA/para 8(2)) and only has effect if the fund manager has obtained the consent of all of the participants in the fund at the time of making the election (TCGA92/SCH5AAA/para 9(1)(a)). (See TCGA92/SCH5AAA/para 1(5) for the definition of participant). Fund ‘manager’ is defined at paragraph 47(1) of Schedule 5AAA TCGA92. Where a tax transparent entity, such as a partnership, or a CIV that has elected for transparency i.e. a Baker-type unit trust, holds the interest in land or property, the fund participants are the investors of that entity (or of each entity in a chain of transparent entities).

Investor consent may be assumed where it is evident that it has been made clear to investors in fund documentation or other relevant material that they are buying an interest in a fund that intends to make a transparency election. The consent of the participants is not required to be submitted when the election is made, instead it should be stored and made available to HMRC on request. For funds that exist at 6 April 2019, evidence of investor consent can be retained in any form (for example, email, web form, note of telephone call or in writing).

Where a fund intends to hold UK property to such an extent that it will be UK property rich it can make a transparency election prior to acquiring UK property. The intention of the fund will be determined by reference to the prospectus (TCGA1992/SCH5AAA para 8(6)).

The UK Property Rich Collective Investment Vehicles (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2020 took effect from the 10 April 2020. Prior to this date a fund was not required to give participant details to HMRC when making a transparency election. However, a transparency election will only be valid from that date if it contains the following information:

  • the participant’s name and, if the participant has one, the participant’s unique taxpayer reference,
  • the participant’s usual or last known place of residence or the participant’s place of business and
  • in the case of a participant who is an individual, the participant’s date of birth.

A transparency election should be made using the online form provided on gov.uk (https://www.gov.uk/guidance/elect-an-offshore-collective-investment-vehicle-for-tax-transparency-on-uk-capital-gains).

Time limit for making a transparency election

The election must be made within 12 months of the CIV first acquiring a direct interest in UK land or an asset that is UK property rich (TCGA92/SCH5AAA/para 9(1)(c)).

Transitional provisions had effect in the case of a fund with such interests that existed at 6 April 2019, therefore in such a case the election must have been made by 1 October 2020. The transitional provisions were extended by the UK Property Rich Collective Investment Vehicles (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2020, as before 10 April 2020, a transparency election could only be made by an existing fund until 5 April 2020.

The UK Property Rich Collective Investment Vehicles (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2020 also added transitional provisions for a fund with such interests that was constituted after 6 April 2020. A transparency election must be made by the later of 1 October 2020, or 12 months after the date on which the fund first acquired an interest in UK property.