CG73998M - UK property rich collective investment vehicles: Exemption election: Overview
TCGA92/SCH5AAA/paras 12 and 16
An election under TCGA92/SCH5AAA/para 12 provides, subject to certain conditions being met, for managers of certain collective investment vehicles to treat the vehicle and / or entities it has at least a 40% interest in as exempt on gains on disposals of interests in UK land (both direct and indirect disposals).
The investors unless exempt, are already, and remain, chargeable on their gains on disposals of interests in the CIV (see CG73997M regarding the disapplication of the 25% ownership de-minimis).
Collective investment schemes that are companies
Eligible offshore CIVs that –
- are UK property rich companies (including deemed companies under paragraph 4, see CG73997D);
- meet certain qualifying conditions in TCGA92/SCH5AAA/PARA 13; and
- commit to report certain information on annual basis to HMRC
can make an election under TCGA92/SCH5AAA/PARA 12 to provide exemption for the CIV itself and proportionate exemption for entities in which it has at least a 40% investment.
Limited partnership collective investment schemes and UK co-ownership authorised contractual scheme (CoACS)
An election can also be made under paragraph 12 in respect of one or more companies that are wholly or almost wholly and directly owned by –
- a CIV which is a partnership collective investment scheme (based in any jurisdiction, including the UK) where the companies are UK property rich, or
- a UK co-ownership authorised investment scheme (CoACS) where the CoACS is UK property rich.
For this purpose, a partnership collective investment scheme may be based in any jurisdiction, including the UK and includes an offshore CIV that has made an election to be treated as a partnership under paragraph 8 (a deemed partnership)
Elections cannot be made in respect of companies that are CIVs, but CIVs in the ownership chain can make an election themselves if eligible to do so.
Other UK property funds
There are existing special tax regimes for other types of UK property funds, specifically UK real estate investment trusts (REITs; see IFM25007) and property authorised investment funds (PAIFs; see IFM04000), and these funds are unable to make an election under paragraph 12(2), or to be the company covered by an election under paragraph 12(3) by a CIS limited partnership or a CoACS. As a result of the provisions brought in by Schedule 5AAA, certain changes were made to the rules for UK REITs. The most significant of these was to extend exemption to the appropriate proportion of gains arising on disposals of UK property rich companies.