The UK Property Rich Collective Investment Vehicles (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2020

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend Schedule 5AAA to the Taxation of Chargeable Gains Act 1992 (c. 12) (TCGA 1992). Schedule 5AAA (the Schedule) was inserted in TCGA 1992 by Schedule 1 to the Finance Act 2019 (c. 1) which concerns the capital gains tax treatment of disposals of interests in UK land by non-UK residents and contains provisions relating to UK property rich collective investment vehicles (CIVs) and their investors.

Regulation 1 sets out when these Regulations come into force and specifies the date on which individual regulations will take effect.

Regulations 2 and 3 amend paragraph 1 of the Schedule to clarify the meaning of “collective investment vehicle” for the purposes of the Schedule.

Regulation 4 amends paragraph 3 of the Schedule to provide that in determining whether a CIV is UK property rich under Part 2 of Schedule 1A to TCGA 1992 no regard is to be had to paragraphs 5 or 6 of that Schedule.

Regulation 5 makes a minor correction to paragraph 6(8) of the Schedule.

Regulation 6 makes amendments to paragraph 7(5) of the Schedule which sets out when a CIV will meet the genuine diversity of ownership condition for the purposes of paragraph 7.

Regulation 7 amends paragraph 8 of the Schedule to clarify HMRC’s obligations in respect of giving notice to provide partnership returns where a CIV has made an election to be treated as a partnership under that paragraph.

Regulation 8 amends paragraph 9 of the Schedule to introduce a requirement that an election under paragraph 8 must contain specified information relating to each participant in the CIV.

Regulation 9 amends paragraph 12 of the Schedule as it concerns the making of an exemption election under that paragraph in respect of a company which is owned by a CIV.

Regulation 10 amends paragraph 13 of the Schedule which sets out the qualifying conditions which a CIV must meet in order to make an election under paragraph 12. The amendments make further provision as to when a CIV will meet the genuine diversity of ownership condition for the purposes of paragraph 12 and modify the UK tax condition as it applies for paragraph 13.

Regulation 11 makes minor amendments to paragraph 21 of the Schedule which provides that, where a CIV or a company is the subject of a paragraph 12 election, there is a deemed disposal where a participant in a fund receives an amount of a revenue nature which represents, in substance, value derived from a direct or indirect disposal of UK land.

Regulation 12 makes amendments to paragraph 22 of the Schedule, which provides that a participant makes a deemed disposal at the point at which a paragraph 12 election ceases to have effect.

Regulation 13 amends paragraph 33, so that it makes provision for further alternative holding structures not currently falling within that paragraph and disapplies the provisions of paragraph 21 in additional circumstances where a CIV is wholly owned by certain investors.

Regulation 14 inserts new paragraph 33A into the Schedule, which provides that where a CIV or qualifying company has made an election under paragraph 12, paragraphs 5 and 6 of Schedule 1A to TCGA 1992 will be disapplied with regard to disposals of any units in the relevant fund.

Regulation 15 makes amendments to paragraph 46 of the Schedule to clarify the meaning of “a close company”, “qualifying investor” and references to “a body corporate”.

Regulation 16 inserts new paragraph 46A into the Schedule which makes provision about references to regulation 75(3) of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), in order to determine whether the CIV meets the genuine diversity of ownership condition for the purposes of the Schedule.

Regulation 17 amends paragraph 47 of the Schedule to include definitions of a “company UK REIT” and “the principal company of a group UK REIT”.

Regulation 18 amends paragraph 49 of the Schedule to extend the deadline for making a transparency election under paragraph 8, in cases where the CIV was constituted before 6 April 2019, from 6 April 2020 to 1 October 2020.

Regulation 19 inserts new paragraph 49A into the Schedule, which extends the deadline for making a transparency election under paragraph 8 in cases where the CIV was constituted on or after 6 April 2019, to the later of the end of the period mentioned in paragraph 9(1)(c) or 1 October 2020.

Regulation 20 inserts new paragraph 51 into the Schedule which makes provision relating to CIVs constituted before 6 April 2020 to clarify whether or not they meet the genuine diversity of ownership condition for the purposes of the Schedule.

A Tax Information and Impact Note has not been prepared for this Instrument as it contains no substantive changes to tax policy.