CG73997D - UK property rich collective investment vehicles: Interaction with other TCGA92 provisions: Application of the rules to different fund structures

Offshore CIVs deemed to be companies (TCGA92/SCH5AAA/para 4)

Irrespective of their legal form, non-corporate offshore CIVs other than partnerships are deemed to be companies and as having shares, so that investors will hold an interest in a UK property rich asset where the CIV itself is UK property rich. This deeming applies for ‘relevant purposes’, that is for the purposes of Schedule 5AAA, and applying section 1A(3)(b) or (c) or 2B(4), and other provisions of TCGA or any other Act, so far as relevant to their application in relation to the vehicle.

This deeming does not go so far as treating them as having ordinary share capital, so they will not be able to rely on provisions that require a relationship to be established between a parent and subsidiary, or common subsidiaries of a parent, through ownership of ordinary share capital.

Note that some rules in Schedule 5AAA apply in the context of actual companies, and where that is the case this distinction is made clear – for example, where an election may be made under TCAG92/SCH5AAA/para 12(3) (see CG73998S).

Default treatment for non-resident CIVs

The default treatment of non-UK resident non-corporate CIVs other than partnerships is that they are companies for the purposes of TCGA (see above) and this is also applicable in respect of their disposals of interests in UK land (TCGA92/s1C) (see CG73922), so they will be persons and chargeable to Corporation Tax on their gains on such disposals, whether or not they are UK property rich.

This default treatment is subject to the elections detailed in CG73997P (election for transparency) and CG73998J (election for exemption).

UK Co-Ownership Authorised Contractual Schemes (CoACS)

CoACS will continue to be treated as not being persons for UK tax purposes generally, and so nothing in Schedule 5AAA brings them within the charge to UK tax for any purpose. Interests in a CoACS are deemed to be shares from the perspective of a non-UK resident investor (TCGA92/SCH5AAA/para 5(2)), purely for the purposes of considering whether those investors hold an interest in a UK property rich asset.

CIVs which are partnerships on first principles will remain transparent for gains.

Property funds that are not within the TCGA92/SCH5AAA/para 1(1) definition

The term ‘property funds’ is used here in its widest sense, that is it refers to any sort of fund vehicle whether or not within the TCGA92/SCH5AAA/para 1(1) definition of a collective investment vehicle (See CG73996N).

Examples may include non-resident listed property funds that are neither alternative investment funds (AIFs) as at TCGA92/SCH5AAA/para 1(1)(b) nor within scope of TCGA92/SCH5AAA/para 1(1)(d), (e), or (f), as companies similar to a UK Real Estate Investment Trust. Such funds are not within Schedule 5AAA and so the core rules apply – in brief, non-UK resident investors will be within the charge to corporation tax or capital gains tax on any gains on disposal of their shares if the company is UK property rich, and if the investor, because of their interest in the company, has a substantial indirect interest in land. This is subject to any exceptions, including where the availability of the 25% de-minimis is relevant – see the guidance on the core rules at CG73920 onwards for further details.