CG73999J - UK property rich collective investment vehicles: Exemption election: Reporting requirements
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Contents of the report for CIV established on or after 1 June 2019
Information in respect of the CIV making the election and entities in its structure
Information in respect of the investors in the CIV making the election
Contents of the report for CIV established before 1 June 2019
Breaches of requirement to make a report
The effect of an election for exemption under paragraph 12 of Schedule 5AAA is to move the point of taxation on gains on UK land from the relevant fund to its investors. It is therefore necessary for HMRC to have access to information regarding a fund’s non-resident investors and Schedule 5AAA provides for information to be reported in two regards –
- TCGA92/SCH5AAA/para14 requires that in order for an election for exemption to have effect, information regarding disposals of investors’ interests in the fund in the two years prior to the date of the election (or, if shorter, since the fund was constituted) must be provided to HMRC. This information is only required for periods from 6 April 2019; and
- TCGA92/SCH5AAA/para15 of Schedule 5AAA provides that information or documents must be provided to HMRC in respect of every period of account ending at a time when the election has effect.
Paragraph 15 provides that HMRC may specify what information is to be reported in respect of participants in the fund and that –
- The information must be provided in relation to the fund’s period of account,
- within 12 months of the end of the period of account.
This is subject to paragraph 15(8), which provides that for reporting a period of account may not be longer than 12 months.
This means that reporting requirements are not specified in Schedule 5AAA and are instead set out in this guidance. HMRC will consult relevant stakeholders prior to making material changes to the information to be reported.
Reporting is done at fund level. This means that, where an election is made by a limited partnership or UK co-ownership authorised contractual scheme (CoACS) under paragraph 12(3), reporting is to be done by the fund manager of the LP CIS or CoACS. Where there are multiple 12(3) companies below a LP CIS, or CoACS the manager will need to make separate reports to HMRC for each company.
Where the requirements of paragraph 15 are not met as regards the provision of information and documents (a breach) without a reasonable excuse, a designated officer of HMRC may revoke the election. Notwithstanding the absence of a reasonable excuse, if a breach is considered insignificant it may be ignored. In considering whether a breach is insignificant HMRC will take account of the number and seriousness of previous breaches. See below for further detail.
To make a report to HMRC, the fund manager will need to register to use the Secure Data Exchange Service (https://www.gov.uk/guidance/how-to-register-and-send-exemption-election-reports-to-hmrc). Once registered, the fund manager will then be able to send exemption election reports to HMRC. More information can be found on gov.uk (https://www.gov.uk/government/publications/send-your-exemption-election-report-for-collective-investment-vehicles-to-hmrc ).
Contents of the report for CIV established on or after 1 June 2019
For CIVs set up on or after 1 June 2019, the report should contain the information listed below. This may require the insertion of suitable wording in the fund’s terms and conditions to ensure investor consent to the sharing of their information.
The report should be accompanied by a statement that the CIV meets the qualifying conditions for the period the report covers, or in the case of a report where the exemption is not being claimed for the period, the conditions that are met.
There is no legislative significance to 1 June 2019. This date is to allow for a period of time after the rules come into force for the rules to be assimilated into onboarding procedures.
Information in respect of the CIV making the election and entities in its structure
- Name, address and country of residence of the CIV making the report (the ‘top-level’ entity)
- Total value of disposals by the top-level entity in the period (or £Nil)
- Overall gain or loss on disposals of top-level entity (if appropriate)
- Name, address and country of residence of entities in the structure under the top-level entity which are covered by the exemption, and for each of the entities:
- The percentage interest the top-level entity holds in them
- The total value of their disposals
- Overall capital gain or loss on their disposals
Information in respect of the investors in the CIV making the election
For all investors:
- Name, address and country of residence
- Date of birth (if the investor is an individual)
- Their UK Capital Gains Tax Unique Taxpayer Reference (if held by manager)
- Their UK Corporation Tax Unique Taxpayer Reference (if held by manager)
- The total value of their disposals
- Their overall capital gain or loss (if this is calculable)
- Whether the investor is not liable to UK tax on the disposals by reason of exemption, immunity, or other similar status (if held by manager)
For the total value of disposals, the CIV must report on the basis of information it can reasonably be expected to obtain given the terms of its agreement with the investor and the information it has available.
This would at the least be any redemptions made by the investor in respect of their interest in the top-level entity, but in some cases may be secondary market transactions where the CIV’s agreement with the investor would mean this information is available.
Contents of the report for CIV established before 1 June 2019
Established CIVs may be restricted in disclosing personal information about their investors under their local information law, and not have terms in their agreement with the investors that allows them to override those restrictions.
To the extent that they are prevented from providing information to HMRC for legal or regulatory reasons, or because of the contractual impediments of their agreement with the investors, there are easements to what is required to be reported in respect of the investors.
In general, provision of information is subject to reasonable excuse. If an existing CIV - set up without being able to take account of these requirements - legally cannot obtain information pertaining to an investor because of existing agreements or local law or regulations, it is reasonable that they not be able to supply that information to HMRC.
All information in respect of the CIV making the election itself and entities in its structure must still be reported.
Subject to the above, the same information regarding the investors required for funds established on/after 1 June 2019 must be supplied in the report.
Breaches of requirement to make a report
Incorrect reporting
In general, HMRC will expect the CIV to take reasonable care to ensure that information reported to HMRC is complete and correct.
A designated officer of HMRC may revoke the election for exemption if there is a serious breach of the reporting requirements. For consequences, see CG73999D.
Where there is a reasonable excuse, the election will not be revoked. Otherwise, HMRC will consider the number and seriousness of breaches made in reporting.
HMRC will generally consider there to have been a serious breach where the CIV reports incorrect information with respect to the disposals by any investor who is taxable and:
- holds a 25% or greater interest in the CIV, or
- the value of whose investment in the CIV is £1,000,000 or greater
In other circumstances, a designated officer of HMRC may revoke the election if the information provided is consistently incorrect to a significant degree, and in particular with regard to information on the disposals by investors.
Late reports and failure to report
HMRC may allow an extension to the time limit where there is a reasonable excuse. If an extension is agreed, then the election remains valid and there is no deemed disposal and reacquisition.
A simple failure to report at all will be treated as a serious breach and HMRC will revoke the election.