Guidance

Technical note — tax rules for the Reserved Investor Fund (RIF)

Published 17 September 2025

1. Introduction 

The Reserved Investor Fund (RIF) is a new type of investment fund with lower costs and more flexibility than existing UK alternatives. It will be open to professional and institutional investors. It complements the UK’s existing funds regimes and provides a UK alternative to similar types of offshore funds. It is expected that most RIFs will be used by institutional investors, such as UK pension funds, to hold UK property.

RIFs are contractual collective investment schemes. They are tax transparent for income purposes, so the income of a RIF will arise directly to its investors. The rules have been designed to both:

• simplify, as far as possible, capital gains treatment for investors

• ensure that rules for taxing gains on UK property, disposed of by non-resident investors, function as intended

Tax and regulatory Statutory Instruments setting out the detail for the new Reserved Investor Fund (RIF) in regulations came into force on 19 March 2025.

The tax regulations (The Co-ownership Contractual Schemes (Tax) Regulations 2025, S.I. 2025/200 (‘SI 2025/200’)) are made under powers in:

• section 103C of, and paragraph 48 of Schedule 5AAA to, the Taxation of Chargeable Gains Act (TCGA) 1992

• section 41 of the Finance (No 2) Act 2017

• section 20 of the Finance (No. 2) Act 2024

The regulatory regulations (The Unauthorised Co-ownership Alternative Investment Funds (Reserved Investor Fund) Regulations 2025, S.I. 2025/216) are made under powers in section 261Z6(1) of the Financial Services and Markets Act (FSMA) 2000.

Where not otherwise specified, references to ‘the regulations’ in this technical note mean the tax regulations.

2. Who should read this note

HMRC has published this technical note to assist customers and their representatives in understanding and applying the RIF legislation.

It provides commentary on the main rules that apply to schemes that have given a valid entry notice into the RIF regime, and the tax rules that apply to investors in such schemes.

This technical note is based on the legislation in the Co-ownership Contractual Schemes (Tax) Regulations 2025. We’ll update the HMRC Investment Funds Manual to provide more detailed guidance, including further worked examples.

3. Overview of the legislation

3.1 What the regulations do

The regulations set out:

• the qualifying conditions for a RIF (in addition to the conditions contained within section 20 of the Finance (No 2) Act 2024)

• entry and exit provisions

• accounting provisions

• information requirements

• penalties for failure to give information or requisite notice

• umbrella scheme provisions

The regulations also make provision about rules for capital gains, capital allowances, and stamps taxes, by making consequential changes to existing legislation.

3.2 Defined terms

Regulation 2 of SI 2025/200 defines certain terms used in the regulations. It also provides that other terms take their meaning from the Taxation of Chargeable Gains Act 1992 or FSMA 2000.

The RIF is an unauthorised co-ownership contractual scheme (COS). The terms ‘contractual scheme’ and ‘co-ownership scheme’ are defined in section 235A of FSMA 2000, as provided for in section 20(6) of the Finance (No 2) Act 2024.

In broad terms, a COS is a collective investment scheme whose arrangements are contractual and set out in a deed, the property of which is held by a depositary on behalf of the scheme’s investors (‘participants’) who have beneficial ownership of the scheme property.

The term ‘co-ownership’ rather than ‘contractual’ is used in the regulatory statutory instrument and section 20 Finance (No. 2) Act 2024, because section 235A of FSMA 2000 refers to a “contractual scheme”, meaning either:

• a co-ownership scheme

• a partnership scheme

There is no intention to introduce a partnership scheme equivalent for RIFs (whereas there is a partnership scheme for authorised contractual schemes). Therefore, all schemes within the RIF regime will be co-ownership schemes.

The regulatory statutory instrument and section 20 Finance (No. 2) Act 2024 also make reference to a scheme that is an ‘AIF’, that is, an ‘alternative investment fund’ as defined by Regulation 3 of the Alternative Investment Fund Managers Regulations 2013 (S.I. 2013/1773). This reflects the government’s view that a scheme within the RIF regime should be required to be an AIF, so that it is subject to an appropriate regulatory framework.

The term ‘unauthorised contractual scheme’ is relevant for tax purposes in the context of Chapter 6 of the regulations ‘SDLT consequences of becoming and ceasing to be a RIF’ and Regulation 56 ‘Structures and building allowances’. Regulation 27 defines an unauthorised contractual scheme as being a co-ownership scheme that is not authorised for the purposes of FSMA 2000, is not a RIF, and is not an eligible co-ownership scheme within the meaning of Regulation 29(1).

The term eligible co-ownership scheme is defined in Regulation 29 within Chapter 6 of the regulations. Regulation 29 provides for continuing opacity for Stamp Duty Land Tax (‘SDLT’) purposes for co-ownership schemes that cease to be a RIF as a result of ceasing to meet a qualifying condition, continue to be a UK-based AIF, and meet the conditions set out in section 261E(2) and (3) of FSMA 2000 (participation limited to professional or large investors), and that are not an authorised co-ownership scheme.

3.3 What a RIF is and how something becomes one

For tax purposes, section 20 Finance (No. 2) Act 2024 provides both a definition of a RIF (including eligibility conditions) and a power to make tax regulations in connection with such a scheme. Broadly, section 20 provides that a RIF is a scheme that is not an authorised co-ownership scheme, is an AIF, meets the conditions set out in section 261E(2) and (3) of FSMA 2000 (restriction on to whom units may be issued), and meets such other conditions as are set out in the regulations.

The regulations then further provide that a co-ownership scheme:

• is a RIF from the date specified in an entry notice provided it meets, or is treated as meeting, the qualifying conditions on that date (Regulations 3 and 4)

• must meet “qualifying conditions” in order to be a RIF (Regulation 5).

Those qualifying conditions are that the scheme:

• is UK-based (Regulation 6)

• meets the ownership requirement (Regulation 5(4)) by meeting either the genuine diversity of ownership condition (Regulation 7) or the non-close condition (Regulation 8)

• meets the restriction requirement (Regulation 10), and

• meets the conditions in section 20(1)(a) to (c) of Finance (No.2) Act 2024

A RIF must also comply with certain other requirements as set out in the regulations. Breaches of the conditions or requirements can lead to a scheme losing its RIF status, and in limited circumstances, HMRC may revoke an entry notice or treat it as never having been made (read Regulations 23 and 24 and further commentary in this technical note).

4. Tax treatment of participants in RIFs

The term ‘participant’ is a defined term in Regulation 2, by reference to section 235 of FSMA 2000, and in broad terms means an investor in a RIF. This note uses the term participant throughout, when discussing investors in the context of the regulations.

4.1 Income

The RIF is transparent for the purposes of tax on income. This means participants are taxable on their share of the fund’s income as it arises. This applies to both corporate and individual participants. Any income received will be subject to the normal applicable tax treatment applied to that type of income in the hands of a participant.

Where the RIF has several different types of income then a participant is taxable on each type of income separately as it arises irrespective of whether the income is immediately, or at any time, passed to the participant.

This means that participants are relying on the operator of the RIF to provide details of the income arising to them. Regulation 35 therefore requires the operator of a RIF to provide sufficient information to participants in the scheme to enable those participants to meet their tax obligations in the United Kingdom with respect to their interests in the scheme. Details are required in relation to each accounting period.

4.2 Capital gains

For Capital Gains Tax purposes, RIFs are treated similarly to authorised contractual schemes (ACS) that are co-ownership schemes so that, in broad terms, they are opaque for capital gains purposes. This is given effect by Regulation 52(3), which extends the rules in section 103D (applicable to interests in tax transparent funds for capital gains purposes), so that they now also apply to interests in RIFs. A unit in a RIF is therefore treated as an asset for the purposes of TCGA 1992, and a participant’s interest in the fund property is disregarded for those purposes.

4.3 Treatment of umbrella schemes

Regulation 52(2) amends section 99A(6) TCGA 1992 “Treatment of umbrella schemes” so that where a RIF is structured as an ‘umbrella scheme’, participants’ interests in the umbrella scheme are disregarded and each sub-scheme is treated as a separate collective investment scheme for capital gains purposes. Participants are therefore treated as holding units in the sub-scheme and not the umbrella scheme. There is further information regarding how the rules for RIFs generally are adapted for umbrella schemes later in this technical note.

4.4 Co-ownership Schemes

Regulation 52(4) inserts new section 103DB ‘Co-ownership schemes which are to be treated as partnerships’ into TCGA 1992. Its effect is that where a co-ownership scheme is not a tax transparent fund as defined in section 103D(1) TCGA 1992, or an offshore collective investment vehicle as defined in paragraph 2(1) of Schedule 5AAA TCGA 1992, it will be treated as transparent for capital gains purposes.

This would include, for example, co-ownership schemes established in the UK that are neither RIFs or co-ownership authorised contractual schemes (CoACS). Participants are treated as holding the assets of such a scheme for capital gains purposes, rather than units in the scheme.

Subsections 103DC(5) to (7) provide that where a relevant co-ownership scheme becomes a RIF, participants are deemed to have sold their interest in the assets of the scheme at their market value immediately before that time, and to have acquired their units at the time the co-ownership scheme becomes a RIF at their market value.

There are some circumstances whereby a co-ownership scheme that qualifies as a RIF will cease to be a RIF. Where that is the case, Regulation 25(1) provides that participants in the RIF are deemed, for the purposes of TCGA 1992, to immediately before that time have sold and reacquired their units in the RIF at their market value.

Section 103DC(8) then provides that a participant’s interest in the assets of the deemed partnership (the co-ownership scheme) as partners is a just and reasonable proportion of the assets having regard to the participant’s units in the scheme.

4.5 Gains accruing on deemed disposals

There are some occasions where participants are deemed to have disposed of and reacquired their units in a RIF:

1. Where a RIF changes the restriction condition it is relying on from meeting the UK property rich condition to meeting the non-UK property assets condition (Regulation 15(3)).

2. Where a RIF breaches the ownership requirement and that is rectified after 30 days of the breach but before 9 months after the breach (Regulation 16(4)).

3. Where a RIF breaches the restriction requirement and that is rectified before 9 months after the breach (Regulation 18(4)).

4. Where a RIF ceases to meet the UK property rich condition during its winding up period (Regulation 19(2)).

5. Where a scheme ceases to be a RIF (Regulation 25(1)).

Further details about these events are set out later in this note.

The relevant regulations set out obligations for operators of RIFs to notify participants of any deemed disposal of units, within a prescribed period of time.

Regulation 26 sets out rules about when gains arising on these deemed disposals are treated as accruing to participants.

4.6 Capital allowances

As RIFs are transparent for the purposes of tax on income and are not themselves persons within the charge to tax, it is the participants in a RIF who will be entitled to any capital allowances due. However, as is the case for operators of CoACS, it is the operator of a RIF who will hold the information which investors require to calculate their entitlement to capital allowances.

The rules in the Capital Allowances Act 2001 have therefore been amended by Regulations 55 and 56 so that they work in a similar way for participants in RIFs as they do for participants in CoACS. This includes the provision of an elective simplified basis of calculating plant and machinery allowances whereby the operator of a RIF may elect to calculate the allowances and allocate them to investors. The guidance applicable to CoACS in HMRC manual IFM08300 contains further details.

5. Entry into the RIF tax regime

5.1 Entry notices

A co-ownership scheme can become a RIF when the scheme operator gives a valid entry notice to HMRC. Regulation 4 sets out the information that must be included in a notice. We’ve developed a form that can be completed online (together with additional forms to provide notification of changes in the conditions that must be met by a RIF, and annual reports). Find out how to submit an entry notification for a RIF.

You can make an entry notice at any time on or before the date from which the scheme is to become a RIF. You can also make a notice within 3 months of the scheme becoming a RIF, as long as Regulation 28 does not apply to the scheme (that is, the scheme is not an unauthorised contractual scheme with chargeable land interests).

Regulation 3 provides that where a co-ownership scheme meets, or is treated as meeting, the qualifying conditions on the date specified in the entry notice, the scheme is a RIF from that date, subject to the caveats in Regulation 3(2).

An entry notice remains valid until an operator submits an exit notice, HMRC issues a cessation notice, or a scheme otherwise ceases to be a RIF.

5.2 Qualifying conditions

A co-ownership scheme must meet or be treated as meeting the ‘qualifying conditions’ in order to be a RIF. Regulation 5(3) states that the conditions in Regulation 5(2) together with those in section 20(1)(a) to (c) of Finance (No.2) Act 2024 are together the qualifying conditions.

In certain circumstances, some conditions can be deemed to be met.

The conditions set out in Regulation 5(2) are that:

• the scheme is UK-based (Regulation 6)

• the scheme meets the ownership requirement, by meeting either the genuine diversity of ownership condition or the non-close condition (Regulations 7 and 8)

• the scheme meets the restriction requirement (Regulation 10)

The conditions set out in section 20(1)(a) to (c) of Finance (No.2) Act 2024 are that a scheme:

• is not an authorised co-ownership scheme

• is an AIF, as defined by Regulation 3 of the Alternative Investment Fund Managers Regulations 2013 (S.I. 2013/1773)

• meets the conditions set out in section 261E(2) and (3) of FSMA 2000 (participation limited to professional or large investors)

• meets such other conditions as set out in the regulations

5.3 The UK-based condition

In broad terms, this condition ensures that the operations of a RIF are carried out in the UK, and that the arrangements are made under, and governed by, UK law.

5.4 The ownership requirement

The purpose of the ownership requirement, in broad terms, is to prevent participants in co-ownership schemes that are only open to a very small or defined pool of investors, or to connected persons, benefitting from coming within the RIF regime.

The ownership requirement is met at any time where the scheme meets either the genuine diversity of ownership condition or the non-close condition.

The genuine diversity of ownership (or ‘GDO’) condition will already be familiar to many practitioners because it is used in other contexts, including:

• for certain purposes in the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964)

• for the reporting fund rules in the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)

• as a condition for making certain elections for the purposes of Schedule 5AAA TCGA 1992 (part of the non-resident capital gains rules that are applicable to collective investment vehicles).

Read more about the GDO condition in HMRC manual IFM17000.

The non-close condition requires a fiction that a RIF is to be treated as if it were a company. Accordingly, the rules in Chapter 2 of Part 10 of CTA 2010 apply, with some modifications as set out in Regulation 8, to determine whether the condition is met.

The non-close condition as modified for RIF purposes is modelled on the test at subsections 528(4) and (5) of Corporation Tax Act 2010, which applies to UK real estate investment trusts (REITs).

Read more about how the rules are applied:

• in HMRC manual IFM22015

• in HMRC manual IFM22017

5.5 The restriction condition

The restriction condition is intended to ensure that the UK’s non-resident capital gains rules work effectively where UK property is held by a RIF.

A RIF, unlike most other types of UK or foreign collective investment vehicles, will never itself be chargeable to tax on gains on disposals of UK land. It is therefore important to have rules that effectively place any charge to tax, on gains related to UK land held by a RIF, on relevant investors in that RIF.

A co-ownership scheme will meet the condition where it meets one or more of 3 restriction conditions specified in Regulation 10:

• the non-UK property assets condition (Regulation 11)

• the UK property rich condition (Regulation 12)

• the exempt investor condition (Regulation 14)

Where the scheme is an umbrella co-ownership scheme, each of its sub-schemes must meet at least one of the restriction conditions for the overall scheme to satisfy the restriction requirement (Regulation 42).

5.6 Non-UK property assets condition

A co-ownership scheme meets the non-property assets condition if it satisfies both the following criteria:

• it has no assets that are interests in UK land

• it has no assets that derive 75% or more of their value from UK land, except for interests described in the following paragraph

This type of RIF will be suitable where the investment strategy of the RIF is to invest in assets other than UK property. When assessing whether the condition is met, Regulation 11(2) provides, in broad terms, that a less than 10% interest in certain UK property rich collective investment vehicles will be a non-UK property asset, where it is held by a scheme that meets the non-UK real estate condition at Regulation 11(3). That condition is that, broadly, the scheme is intended to have only a small exposure to investments consisting of rights or interests in companies which are themselves UK property rich, as evidenced in its prospectus.

5.7 UK property rich condition

A co-ownership scheme meets the UK property rich condition if it is ‘UK property rich’ for the purposes of Schedule 5AAA to TCGA 1992 (Read paragraph 3 of that schedule).

This is subject to Regulation 12(1)(b) and (2), so that where a scheme relies on meeting the non-close condition for the purposes of qualifying as a RIF, it must also meet the ‘UK tax condition’ in paragraph 13(7) of Schedule 5AAA to TCGA 1992, applying those rules on the assumption that the scheme were a company in which the participators in the scheme held shares.

5.8 Exempt investor condition

A co-ownership scheme meets the exempt investor condition at any given time if all of its participants are exempt from UK Capital Gains Tax or UK Corporation Tax (as appropriate) on gains arising from the disposal of their units in the scheme, other than solely by reason of being non-UK resident.

There is an exception from this general rule where a participant holds all their units in the scheme solely in their capacity as the operator of the scheme, for example where they temporarily hold redeemed units with a view to sale of those units to another eligible investor.

No account is to be taken of the possibility of a charge to Corporation Tax on income in respect of a gain accruing on a disposal of a unit by an insurance company, or a friendly society, where throughout the time that the company or society holds the unit, it carries on life assurance business and the unit is an asset which, applying the rules in section 138 of Finance Act 2012, is wholly matched to a liability of that business that is not basic life and general annuity business (BLAGAB), or the company or society carries on long-term business, none of which is BLAGAB and the unit is an asset held for the purposes of that business.

An exempt investor RIF is not restricted in terms of the types of assets it can hold, unlike in the case of RIFs relying on either of the other 2 restriction conditions.

5.9 Qualifying conditions treated as met for initial period

When a co-ownership scheme is applying to become a RIF and it has not previously been a RIF then, provided certain conditions are met, there is a grace period where specified qualifying conditions can be treated as met.

This is designed to provide some flexibility in the early stages of the scheme. The term ‘grace period’ is not used in the regulations (instead referring to the condition or requirement as “treated as met for initial period”) but is used here as a descriptive term for the effect of the rules.

The qualifying conditions that can be covered by a grace period are:

• the ownership requirement (Regulation 9)

• the UK property rich condition (Regulation 13)

To use a grace period, the entry notice submitted for the scheme must include the following:

1. A clear statement that the scheme is relying on Regulation 9 or 13 to meet the qualifying condition.

2. A declaration that the scheme operator intends and reasonably expects to meet the qualifying condition within 12 months from the date specified in the notice.

3. A detailed explanation of the actions the scheme operator has already taken or intends to take to ensure the qualifying condition is met within 12 months (the ‘initial period’).

There is no definition of ‘intends’ or ‘reasonably expects’, so those terms will take their normal meaning. It is expected that the operator of a relevant scheme will have a clear documented plan to meet the relevant conditions within 12 months.

If a relevant condition is not met within 12 months then the deemed meeting of the condition will end, and there will be a breach of the condition.

If, during the 12 month period, it becomes apparent that there is no longer a reasonable expectation that the co ownership scheme will meet the relevant condition within 12 months, then the operator must notify HMRC within 30 days beginning with the day on which it becomes apparent. The grace period ceases to apply in relation to the scheme from the beginning of the day when it became apparent, and there will be a breach of the condition.

The deemed meeting of both the ownership requirement and the UK property rich condition ceases from the date on which the scheme meets the ownership requirement or the UK property rich condition. This means that the scheme cannot rely on deeming the conditions to be met within the initial 12 month period where there is a subsequent breach of either condition.

Further conditions (Regulation 13(5)) must be met in order for the UK property rich condition to be treated as met for the initial period:

1. The scheme must not have previously been an authorised contractual scheme (in practice, given that the scheme will be a co-ownership scheme this means that it must not previously have been a Co-ownership Authorised Contractual Scheme (CoACS)).

2. The scheme must not be a scheme where participants have received units in exchange for something other than money.

These conditions are intended to ensure that unrealised gains from investments in other funds cannot be rolled over into a new RIF, where that RIF is making use of the grace period. Without the conditions, such rolled up gains could be realised by non-resident participants disposing of units in a RIF whilst it was not in fact UK property rich and so no charge to tax would be possible.

Additionally, if the scheme makes a specific type of payment (a prohibited repayment of capital), during the grace period, the grace period is treated as having never applied in relation to the scheme, unless as a matter of fact the scheme would actually meet the UK property rich condition at the time the payment is made (Regulation 13(4)).

6. Changes in and breaches of the qualifying conditions, and exit from the RIF regime

Chapter 4 of the regulations sets out what happens when there is a change in the restriction conditions relied on upon entry to the RIF regime. It also sets out the consequences of a RIF breaching any of the qualifying conditions.

6.1 Change in the restriction condition relied on

A RIF’s entry notice remains valid provided at least one of the restriction conditions is satisfied, and a scheme’s status as a RIF is unaffected by any change in which specific restriction condition(s) it meets. Regulation 15(1) does, though, provide an obligation to notify participators and HMRC if there is a change in which of the restriction conditions the RIF relies on meeting. The notifications must be sent within a period of 30 days beginning with the day on which the change occurs.

There is no need to send notifications if a scheme meets 2 restriction conditions at the same time but ceases to meet one of them, as the scheme continues to rely on one of those conditions. For example, a scheme may initially meet both the non-UK property assets condition and the exempt investor condition. There is no need to send notifications where it can continue to rely on either of those conditions, but there would be if it ceased to meet both of them and newly relied on meeting the UK property rich condition.

Regulation 15 also provides that, where a co-ownership scheme’s status as a RIF depends on it meeting the UK property rich condition but it then ceases to meet that condition and instead relies on meeting the non-UK property assets condition, then each participant is deemed to have sold and reacquired their units in the RIF at their market value at that time. The operator of the RIF must notify each participant in the RIF of such deemed disposals within 30 days beginning with the day on which the RIF ceased to meet the UK property rich condition. Whilst the purpose of this deemed disposal is to ensure that non-UK resident participants are subject to tax on gains arising from UK property prior to the RIF ceasing to be UK property rich, after which non-residents would no longer have a chargeable interest, the deemed disposal applies to all participants.

6.2 Breaches of qualifying conditions

The regulations set out the consequences where a breach of any of the qualifying conditions occurs. In some cases, this includes cure periods to allow a scheme time to rectify breaches. The term ‘cure period’ is not used in the regulations, but is used here as a descriptive term for the effect of the rules.

The default position is set out in Regulation 20, which states that a scheme ceases to be a RIF when it ceases to meet one or more of the qualifying conditions. Where there is no cure period then the scheme will exit the RIF regime (read ‘Ceasing to be a RIF’ for details of other causes of a scheme exiting the RIF regime, and what happens on exit). In such cases, a scheme ceases to be a RIF from the beginning of the first day on which it ceases to meet one or more of those conditions.

However, cure periods may apply where there is a breach of the ownership or restriction requirements, as follows.

6.3 Breach of ownership requirement

The ownership requirement is met at any time that a scheme meets either the genuine diversity of ownership condition or the non-close condition. When the requirement is breached, Regulation 16 provides that the requirement will be treated as if it continued to be met until the earlier of:

1. The end of a period of 9 months beginning with the day on which the breach occurred.

2. The beginning of the day on which it becomes apparent to the operator of the RIF that there is no reasonable expectation of the RIF rectifying the breach by the end of the 9 month period, and in such cases the operator of the RIF must notify HMRC of that fact within 30 days.

Where the breach is rectified before the end of the 9 month period, but more than 30 days after the date on which the breach occurred, each participant in the RIF is deemed for the purposes of TCGA 1992 to have sold and reacquired their units in the RIF at market value immediately before the time of the breach, and the operator of the RIF must notify each participant accordingly within 30 days from the day the breach was rectified.

Regulation 17 provides that where a RIF breaches the ownership requirement 5 or more times in any period of 12 months, there is a deemed disposal for participants where the breach is rectified at any point before the end of the 9 month period, including where rectified within 30 days after the date on which the breach occurred.

6.4 Breach of a restriction requirement

The restriction requirement is met at any time that a scheme meets at least one of the following conditions:

• the non-UK property assets condition

• the UK property rich condition

• the exempt investor condition.

When a RIF breaches the restriction requirement, Regulation 18 provides for a cure period that operates on the same basis as the cure period applicable for breaches of the ownership requirement with the following exceptions:

1. The deemed sale and reacquisition of participants’ units occurs immediately before the time of all breaches where the RIF rectifies the breach by the end of the 9 month period (so there is no initial 30 day grace period as there is for breaches of the ownership requirement).

2. If the breach relates to the exempt investor condition and the operator has taken reasonable steps to monitor compliance with that condition, the 9 month cure period starts from the day the operator became aware of the breach.

6.5 Winding up of a RIF that is UK property rich

A RIF that relies on meeting the UK property rich condition may breach the condition on one or more occasions during a winding up period when it is disposing of its assets and returning cash to its participants. Without further provision a RIF would at that time exit the RIF regime, unless it met another applicable condition (that is, the non-UK property assets condition or the exempt investor condition).

Regulation 19 addresses this by providing that a RIF will in such circumstances be treated as if it continued to meet the UK property rich condition for the duration of the ‘winding up period’. That period is by default 2 years beginning with the day on which the RIF ceased to meet the UK property rich condition, but it will also include any extension of that period granted by HMRC following an application made by the operator of the scheme. Regulation 19 sets out the application process and time limits, and the available appeal procedure in the event that an officer of HMRC does not consider it reasonable to agree to an initial or further extension of the winding up period.

Where Regulation 19 applies, all participants are deemed to have sold and reacquired their units in the RIF at their market value immediately before the time that the RIF ceases to meet the UK property rich condition. This protects the UK’s taxing rights under the non-resident capital gains rules in cases where any participants are non-UK resident. The operator must notify all participants of the deemed disposal within 30 days from the day on which the RIF ceased to meet the UK property rich condition.

7. Ceasing to be a RIF

Chapter 5 of the regulations sets out the circumstances in which a scheme might cease to be a RIF, and the processes involved.

A scheme may cease to be a RIF when any of the following occurs:

• the scheme ceases to meet one or more of the qualifying conditions in section 20(1) F(No2)A2024:
  • the scheme becomes an authorised co-ownership scheme
  • the scheme ceases to be an AIF as defined by Regulation 3 of the Alternative Investment Fund Managers Regulations 2013
  • the scheme no longer meets the conditions in FSMA 2000 S261E(2) and(3)
• the scheme breaches one or more of the RIF qualifying conditions set out in the regulations and is not rectified in the cure period (if applicable)
• the operator of the RIF submits an exit notice to HMRC (Regulation 22)
• a designated HMRC officer determines by notice that the RIF is to be treated as if the entry notice had never been given (Regulation 23)
• an HMRC officer issues a cessation notice to the operator of the scheme (Regulation 24)

7.1 Ceasing to meet one or more of the qualifying conditions in section 20(1) F(No2)A2024

Whether a scheme ceases to meet the qualifying conditions in section 20 is a question of fact. If it does so, it will cease to be a RIF from the beginning of the day on which it ceases to meet one or more of those conditions.

7.2 Ceasing to meet one or more of the qualifying conditions in the regulations

If a breach of a qualifying condition is not rectified within any available cure period, the scheme will cease to be a RIF from the date of the breach. There is an exception to this in the case of an unrectified breach of the exempt investor condition at Regulation 10(2)(c), for which the scheme will cease to be a RIF from the first day on which the operator became aware of the breach provided the operator has taken reasonable steps to monitor compliance with that condition.

7.3 Exit notices given by the operator of a RIF

The operator of a RIF may give an exit notice to HMRC at any time prior to the exit date specified in the notice, or within a period of 3 months beginning from the specified date. The scheme will cease to be a RIF from the date specified.

7.4 RIF treated as if entry notice had never been given

The operator of a RIF must make certain ‘relevant declarations’ under provisions in Regulations 4, 9, and 13. In broad terms, the declarations relate to:

• an intention that a scheme will, on entering the RIF regime, remain a RIF unless it winds up or converts to an authorised co-ownership scheme, and
• cases where a condition is treated as met for an initial period, and there is an intention and reasonable expectation that the scheme will in fact meet the condition within 12 months.

A designated HMRC officer must issue a determination notice that a RIF is to be treated as if the entry notice had never been given if that officer has reasonable grounds to believe that the operator of the RIF did not have the intention referred to in the declaration, or could not reasonably have had the expectation referred to in the declaration. In assessing whether there are ‘reasonable grounds’, the designated officer will consider the available evidence and will reach their conclusion based on that evidence.

The purpose of the provisions is to prevent co-ownership contractual schemes intentionally entering the RIF regime for a temporary period in order to obtain the regulatory and tax advantages available (for example, limited liability for participants and opacity for Stamp Duty Land Tax purposes), and then enjoying those benefits outside of the rules relating to RIFs.

A determination may only be made where a scheme has been a RIF for a continuous period of less than 2 years at the time that it ceases to be a RIF as a result of ceasing to meet a qualifying condition or by the operator giving an exit notice in relation to the scheme.

Determinations may only be made by a designated officer of HMRC, who will be a senior official with at least deputy director status. A determination notice must include the date of the determination and the reasons for the determination. There is an appeal process available as set out in Regulation 23.

Determination notices are a different process to ‘cessation notices’.

7.5 Cessation notice given to operator of RIF

Regulation 24 requires a cessation notice to be issued by an officer of HMRC to an operator of a RIF where any of the following apply:

• the operator of the RIF fails to provide information required by Regulations 37 and 38 within stated times
• the officer determines that it is reasonable to do so in order to safeguard the public revenue
• it is determined that a RIF has breached one or more qualifying conditions, and the operator of the RIF has not given a notice required under Regulation 9(3), 13(3), 16(2), 18(3) or 21

A notice in respect of information required in respect of each accounting period under Regulation 37 will be given where the operator fails to provide either:

• the information within 6 months of the information reporting date (‘IRD’, that is, the date 6 months after the end of the accounting period) without reasonable excuse
• the required information by the IRD without reasonable excuse, but does so within 6 months of that date and has not been similarly late previously

These rules are intended to encourage timely submission of information, which is important for HMRC operational and compliance purposes. The provision of a ‘reasonable excuse’ defence, and an appeals process when a cessation notice is issued, provide protections for customers.

Example

The operator of RIF XYZ has an accounting period ending 31 December 2026. The operator must provide the required information to HMRC within 6 months of that date, that is by 30 June 2027 (the IRD) but does not do so until 20 August 2027. There is no reasonable excuse for the failure, but the operator has not previously committed a ‘minor breach’ (that is, submitted the information late but within 6 months of the IRD) and so no cessation notice will be issued on this occasion.

The operator then sends the required information for the accounting period ending 31 December 2027 on 31 January 2029, which is 7 months after the IRD of 30 June 2028, and again without reasonable excuse. Because the information is received more than 6 months late, a cessation notice will be issued. A notice would be issued where the information is more than 6 months late even if there has not previously been a minor breach as in this example. The operator could appeal against the notice within 30 days beginning with the day on which the notice was given to the operator. When an appeal is made by the RIF, the cessation notice is effectively set aside until the appeal is determined or withdrawn. Any appeal will be determined on the question of whether the operator of the RIF had a reasonable excuse for the failure to provide the required information.

A cessation notice will also be issued where the operator of a RIF fails to provide information required by a notice under Regulation 38 to HMRC before the last day of the period allowed, and there has been no successful appeal against the notice. There is no separate appeal process against the issue of the cessation notice, as the original information notice is itself appealable.

A notice issued in order to safeguard the public revenue may only be given by a designated officer of HMRC, who will be a senior official with at least deputy director status. A notice will only be issued after careful consideration of the facts, and it is appealable within 30 days of being given. Any appeal will be determined on the question of whether it was reasonable for the officer to give the notice in order to safeguard the public revenue.

In general, HMRC expect that the use of the power in Regulation 24(1)(d) to issue a cessation notice to protect the public revenue will only be used in exceptional circumstances. The gateway tests into the regime should ensure that only genuine commercial investment arrangements are within the regime, and HMRC will not issue a notice except in response to a set of arrangements undertaken by the operator of a RIF‎ or its investors where tax avoidance is the main object, or one of the main objects, of ‎those arrangements.

A cessation notice will be issued where a required notification has not been given by the operator of a RIF in respect of one or more breaches of the qualifying conditions. This provision is necessary to have an effective way to address failures by operators to identify or notify such breaches. Such a notice is appealable within 30 days of it being given. Any appeal will be determined on the question of whether the RIF has breached one or more of the qualifying conditions.

7.6 Time cessation notice takes effect

Where a cessation notice relates to failures by the operator of a RIF to provide specified information to HMRC as required under Regulations 37 and 38, the scheme ceases to be a RIF from the beginning of the day on which the notice is given to the operator.

Where a cessation notice is given where either:

• a designated HMRC officer has determined that it is reasonable to do so to safeguard the public revenue

• an officer of HMRC has determined that a RIF has breached one or more qualifying conditions but the operator of the RIF has failed to give a required notice to that effect

the scheme ceases to be a RIF from the beginning of the day specified in the notice. Where the notice relates to failing to give notice that a RIF has breached one or more qualifying conditions, it may not specify a day earlier than the first day of a period of 12 months ending with the date on which the notice was given.

This is subject to applicable appeal processes.

Read ‘Stamps taxes’ for guidance on SDLT seeding relief consequences of a cessation notice.

7.7 Requirement to notify HMRC

Where a RIF ceases to meet one or more of the qualifying conditions then, subject to any applicable cure period, the scheme will cease to be a RIF from the beginning of the first day on which it ceases to meet the conditions.

The operator of the RIF must notify HMRC in accordance with Regulation 21, which sets out the relevant time limits and required details.

8. Ongoing obligations of RIFs

There are some ongoing obligations placed on the operator of a scheme after it has entered the RIF regime. Some of those obligations, such as the requirement to notify deemed disposals and changes in restriction conditions relied on have already been covered. Other instances where obligations arise are set out in the following section.

8.1 Beginning and End of Accounting Periods

Regulation 33 sets out rules for determining the beginning and end of an accounting period.

8.2 Preparation of Accounts

Regulation 34 sets out the required method for preparing the accounts of a RIF for an accounting period, and a requirement for auditing by a qualified independent auditor to confirm their adherence to that method.

8.3 Providing information to participants (investors)

Regulation 35 requires the operator of a RIF to, in relation to each accounting period, provide investors with sufficient information to meet their tax obligations. This is a similar obligation to that placed on operators of Co-ownership Authorised Contractual Schemes (CoACS), and the CoACS guidance in HMRC manual IFM08220 provides further details on what HMRC would expect to be provided in this regard.

8.4 Providing information to other RIFs or authorised co-ownership schemes

Regulation 36 requires the operator of a RIF into which an investment is made by another RIF or an authorised co-ownership scheme, to provide sufficient information to that other scheme so that it can meet its own information reporting requirements for its participants. This is because, as both the investee and investor schemes are transparent for income purposes, income effectively flows through each scheme and arises directly to the investee scheme’s participants.

8.5 Providing information to HMRC

Regulation 37 sets out the information which the operator of a RIF must provide to HMRC on or before the information reporting date in relation to each accounting period of the RIF. Find out how to submit accounting period information for a RIF.

The information is required to allow for the proper monitoring and review of the RIF regime, and to provide information about participants to enable HMRC to perform its duties.

8.6 Further Information to be provided to HMRC

Regulation 38 provides that HMRC may issue a notice to the operator of a RIF to ask for information specified in that Regulation.

The operator will have a minimum of 42 days to respond to HMRC, and an officer of HMRC may extend the period where they consider it is reasonable to do so. HMRC may, in the first instance, contact the operator to explain what information is required and agree a suitable timescale for its production and only subsequently use the formal power to require the operator of a RIF to provide information if the initial approach is unsuccessful.

Where a notice relates to information required to be provided to HMRC under Regulation 37, HMRC may only request information relating to an accounting period for which the information reporting date (that is, the date falling 6 months after the end of accounting period) falls within the previous 12 months.

Example

The operator of RIF XYZ provides information required by Regulation 37 for its accounting period ending 31 December 2026 to HMRC on 20 March 2027. The information reporting date, that is the last day on which information should be provided to HMRC, is 30 June 2027. If HMRC want to issue a notice to request further information in relation to that accounting period (for example, clarification of some of the information provided) it must do so by 30 June 2028.

The operator of a RIF to whom a notice is issued can bring an appeal against a request for information or documents under Regulation 38(1)(b) for the purposes of determining whether the RIF has met or continues to meet the qualifying conditions, or the amount of time given to provide them. An appeal must be made within the period of 30 days beginning with the date on which the notice to the operator was issued. Where an appeal is made, the notice is treated as if it had not been given until the appeal is determined or withdrawn. The tribunal will determine, as appropriate, whether:

1. It was just and reasonable for the officer of HMRC to require the information requested.

2. Whether the amount of time given to provide the information was just and reasonable.

The tribunal can vary, affirm, or cancel the notice.

8.7 Penalties for failing to provide information

Regulation 40 sets out the penalty provisions that apply where the operator of a RIF fails to give required information or notifications, or to prepare accounts in the prescribed manner.

Penalties will be determined in accordance with section 100 of the Taxes Management Act 1970, and are subject to the usual review and appeal processes for penalties made under that section. HMRC guidance is contained in the Enquiry Manual from HMRC manual EM4500 onwards.

9. Umbrella schemes

9.1 Introduction

Chapter 11 of Part 2 of the regulations sets out how that part is modified in various regards where a scheme is an “umbrella co-ownership scheme”, referred to generally in this technical note as an ‘umbrella scheme’. Such a scheme is defined as a co-ownership scheme which provides arrangements for the separate pooling of the contributions of the participants and the profits and income out of which payments are to be made to them, and under which the participants are entitled to exchange rights in one pool for rights in another.

An ‘umbrella RIF’ means an umbrella co-ownership scheme which is a RIF. In other words, it is the umbrella and not the sub-schemes that is a RIF on entry to the RIF regime.

A ‘sub-scheme’ in relation to an umbrella co-ownership scheme or an umbrella RIF, means the arrangements constituting the scheme or RIF so far as they relate to a separate pool of property. References to participants in relation to a sub-scheme are references to participants in those separate arrangements.

The rest of this section explains how the rules in Part 2 are adapted for umbrella schemes. In each case, the Regulation referred to explains how the language in various other regulations is adapted so that it works effectively when considering an umbrella scheme.

9.2 Restriction requirement

Regulation 42 requires each sub-scheme to meet at least one of the restriction conditions in order for the umbrella scheme to itself meets the restriction requirement under Regulation 10. That Regulation sets out how the language in various other regulations is adapted so that it works effectively when considering an umbrella scheme.

9.3 Becoming a reserved investor fund

Regulation 43 modifies the entry provisions for umbrella schemes.

The entry notice procedure set out in Regulation 4 is modified for umbrella schemes so that the requirement to set out which restriction condition is met is applied to each of the sub-schemes.

Regulation 13 sets out in what circumstances the UK property rich condition may be treated as met for an initial period, and is modified so that it applies at sub-scheme level. There are also rules to set out in what circumstances an umbrella scheme may not rely on Regulation 13.

9.4 Ceasing to be a reserved investor fund

Regulation 44 modifies Regulation 19 (‘Winding up of a RIF that is UK property rich’) so that it applies to a sub-scheme that ceases to meet the UK property rich condition at a time when the operator of the RIF is taking steps to wind the sub-scheme up. Regulation 26, which deals with the timing of gains accruing on deemed disposals, is also modified.

9.5 Additional notification requirements

Regulation 45 requires the operator of an umbrella RIF to notify HMRC within a period of 30 days, if either:

• a sub-scheme of the RIF is wound up

• a new sub-scheme of the RIF is established, and which of the restriction conditions is met by the new sub-scheme

9.6 Capital gains

Read the section ‘Capital gains’ for details of how participants’ interests in RIF umbrella schemes are treated for capital gains purposes.

10. Miscellaneous provisions

10.1 Personal portfolio bonds

Read HMRC manual IPTM7700 for personal portfolio bonds guidance. Regulation 60 adds RIFs to the table of categories of permitted property listed in section 520 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005).

10.2 Investments in Real Estate Investment Trusts (REITs)

Regulation 61 adds RIFs to the list of ‘institutional investors’ at section 528(4A) Corporation Tax Act 2010 (CTA 2010). Guidance for REITs and their investors can be found in HMRC manual IFM22000 onwards.

10.3 Co-ownership contractual schemes — amendments to relevant legislation

Regulation 62 amends the Co-ownership Authorised Contractual Schemes (Tax) Regulations 2017 (S.I. 2017/1209) to refer to RIFs where appropriate.

11. Stamp taxes

11.1 Introduction

The regulations make provision for Stamp Duty Land Tax (SDLT), Stamp Duty and Stamp Duty Reserve Tax (SDRT). Stamp Duty and SDRT are collectively known as ‘stamp taxes on shares’ (STS).

SDLT is charged on the purchase of land and buildings situated in England and Northern Ireland. Responsibility for property transaction taxes equivalent to SDLT in Scotland and Wales are devolved to their national administrations; more information can be found in the HMRC Stamp Duty Land Tax Manual. Information on STS can be found in the HMRC Stamp Taxes on Shares Manual.

To a large extent, the SDLT and STS treatment for RIFs mirrors that for co-ownership authorised contractual schemes (CoACS), and Chapters 1 and 4 of Part 3 of the regulations mainly amend the existing legislation in Finance Act 1986, Finance Act 1999, and Finance Act 2003 so that it also applies to RIFs. One important provision that is applied to RIFs is the availability of an SDLT seeding relief, so that where conditions are met and restrictions do not apply, a relief will apply to enable a RIF to be ‘seeded’ with chargeable interests in land in return for units in the RIF without a charge to SDLT.

There are also some new provisions specifically for RIFs, for example rules for determining when a further SDLT return must be submitted to HMRC, and the date from which interest on unpaid tax is incurred, in cases where a RIF ceases to be a RIF within the seeding relief control period (and so seeding relief is clawed back).

11.2 Summary of new provisions for RIFs

Amendments to Finance Act 2003:

• section 65A(7) — ensures a RIF cannot claim seeding relief multiple times by exiting and later re-entering the regime
• section 87A — sets out the date from when interest on unpaid tax is charged in relation to the clawback of SDLT seeding relief, if the scheme ceases to be a RIF due to breaching a qualifying condition, or if Regulation 19 (winding up of a UKPR RIF) ceases to apply
• paragraph 10(5A) Schedule 7A — states that an entry notice must have been given in order to claim seeding relief
• paragraphs 14(A1), 15(1B), and (8A) Schedule 7A — where a seeding transaction was entered into by a RIF that has since converted into a CoACS, the scheme will meet the genuine diversity of ownership (GDO) requirement for SDLT seeding relief purposes at any time that it meets the GDO or non-close qualifying conditions in the RIF regs (except if it only meets those conditions by virtue of a grace period)
• paragraph 15(3) Schedule 9A — provides that a RIF is not “non-resident” in relation to any chargeable transaction (this is relevant for the non-resident SDLT regime)

11.3 SDLT consequences of becoming and ceasing to be a RIF

Background

Without provision, RIFs would be transparent for SDLT purposes. This would mean that when a scheme acquires property, the purchase would be treated as having been made by the underlying investors on a joint and several basis, with the obligation to file a SDLT return and liability for the resulting tax failing on those investors. Additionally, where property is held by a scheme, any change in investors’ proportional entitlements to the scheme property could result in an SDLT charge, for example where new investors joined or existing investors left the scheme.

Both of these consequences would be administratively burdensome, so to deal with them, RIFs are deemed to be companies for SDLT purposes, with the rights held by investors treated as if they were shares in the company. Where there is an umbrella RIF, then each sub-scheme is treated as a company. This is done by amending section 102A Finance Act 2003 to extend the current CoACS treatment to RIFs.

This makes RIFs opaque structures for SDLT purposes, and ensures that transactions in entitlements or rights within such schemes would not result in any SDLT charge. Responsibility for reporting and paying SDLT upon acquisitions of property fall to the operator of the scheme rather than the investors.

11.4 ‘Stand alone’ regulations in Chapter 6 of Part 2 of the RIF regulations

There are further rules that apply in addition to those applying in the basic position.

Regulation 28 — Land transaction upon unauthorised contractual scheme becoming a RIF (SDLT entry charge)

Regulation 28 is an anti-avoidance provision, needed to address concerns about the ‘enveloping’ of property assets within a RIF (enveloping refers to holding property through an entity) without a charge to SDLT applying.

Regulation 28 places an SDLT entry charge on the market value of property held when a unauthorised contractual scheme (UCS) enters the RIF regime. If a scheme exits the RIF regime but then subsequently re-enters, an SDLT charge based on the market value of the chargeable property held by the scheme immediately prior to re-entry would apply if there has been any change in property held or changes in ownership during the period the scheme is outside the RIF regime.

Regulation 29 — RIF that ceases to be a RIF and becomes an eligible co-ownership scheme

If a scheme ceases to be a RIF but continues to meet the conditions in Regulation 29(1)(b) (so that it is an “eligible co-ownership scheme” (ECOS)) then it will retain its SDLT opacity for as long as it continues to meet those conditions, or until it is wound up, or it re-enters the RIF regime (in which case the general RIF opacity rule will apply to the scheme).

Any other unauthorised contractual scheme (so, any co-ownership scheme that is not a CoACS, RIF, or ECOS), whether or not it has previously been a RIF, will be transparent for SDLT purposes.

Regulation 30 — Land transaction upon RIF or eligible co-ownership scheme becoming unauthorised contractual scheme

Regulation 30 does not itself impose an SDLT charge, but deems there to be a land transaction. This provides a statutory mechanism for the chargeable interests to revert to the investors upon the scheme exiting the RIF regime or ceasing to be an eligible co-ownership scheme. Regulation 30 does not deem chargeable consideration to arise on the transaction in the same way that Regulation 28 does. It ensures that where a RIF exits the regime and does not meet the conditions in Regulation 29 and so becomes a transparent UCS, then:

1. An SDLT exit charge arises there is chargeable consideration in respect of the transfer of the chargeable interests to the participants.

2. There is an acquisition of a chargeable interest for the purposes of section 75A Finance Act 2003.

Regulations 31 and 32 — Withdrawal of seeding relief: application to postpone payment of tax where appeal against relevant decisions

If a RIF exits the regime within the seeding period or the control period, the relief given will be clawed back whatever the circumstances of exit, including for example where the RIF becomes an eligible co-ownership scheme upon exit (and so retains SDLT opacity).

If the reason the RIF exits the regime is because HMRC has issued a notice that Regulation 23 applies to treat the entry notice as if it had never been made, or issued a cessation notice under Regulation 24, then if the operator appeals against that notice, Regulation 31 allows the SDLT clawback to be postponed until the appeal has been determined. Regulation 32 sets out how HMRC will deal with the postponement application, and gives the operator the right to refer the application to tribunal if HMRC refuses to allow it.

Regulations 31 and 32 are based on existing SDLT appeal provisions. There is no right of appeal against the clawback of seeding relief, but instead the question of whether there is an additional SDLT liability is dependent on the basis of the determination of any appeal against a notice issued under Regulations 23 or 24.

11.5 Other ‘stand alone’ regulations

Other SDLT related provisions deal with the following matters:

1. Regulations 3(2) and 4(2)(b) — have the effect that where an SDLT entry charge arises under Regulation 28 (because a UCS enters the RIF regime whilst holding chargeable interests), the scheme cannot begin operating as a RIF until an entry notice has been given to HMRC. This means that the ability to submit an entry notice up to 3 months after a scheme begins operating as a RIF is disapplied where an entry charge applies. This is to prevent problems arising with late filing penalties arising due to the 14-day return deadline for submitting an SDLT return.

2. Regulation 23(4) — where a Regulation 28 entry charge applied to a scheme and HMRC determines under Regulation 23 that the entry notice for the scheme should be treated as if it had never been given, Regulation 23(4) saves the Regulation 28 land transaction (which means that the SDLT charged, along with any interest or penalties that may have applied in relation to the transaction will remain within charge and will not be repaid), and also provides a statutory mechanism for the chargeable interests to revert to the investors. without an SDLT charge.

11.6 Further detail on seeding relief

Conversions of RIFs to CoACS

There will be no SDLT charge if a RIF converts to a CoACS, because:

1. both RIFs and CoACS are co-ownership contractual schemes.

2. section 102A applies to both types of fund, so there is in effect no land transaction.

Seeding relief is available for both types of scheme and so there will only be a clawback of RIF seeding relief if paragraph 14 Schedule 7A Finance Act 2003 applies, subject to paragraph 15(8A) (as amended by Regulation 59(11) and (12) respectively). This means there would be a clawback if the RIF did not meet the genuine diversity of ownership condition (GDO) other than by virtue of the grace period in Regulation 9. This is because the grace period would cease to have effect upon conversion to a CoACS (whilst CoACS are not generally required to meet a GDO condition, they are required to do so if seeding relief is claimed).

Withdrawal of seeding relief

If a RIF ceases to meet the conditions necessary for seeding relief during either the seeding period or the control period, or if the scheme ceases to be a RIF during those periods, the relief will be withdrawn (unless it converts to a CoACS and meets the GDO).

If a RIF’s seeding relief is withdrawn, the RIF must repay the previously claimed relief, along with potential interest charges.

Seeding relief clawback and Interest

Finance Act 2003 provides the process for calculating the amount to be repaid and the interest charged if seeding relief is withdrawn.

Regulation 58(6) inserts new section 87A into Finance Act 2003 which sets out the ‘relevant date’ for calculating interest on unpaid tax following the withdrawal of seeding relief. The ‘relevant date’ depends on the circumstances under which the relief was withdrawn.

If the relief was withdrawn because the RIF breached the GDO condition, the non-close condition or the restriction requirement, then if:

• the effective date of the land transaction fell before the cure period, the relevant date is the date on which the breach first occurred

• the effective date of the land transaction fell within the cure period, the relevant date is the effective date of the land transaction

If the relief was withdrawn because the RIF ceased to be a RIF as a result of ceasing to meet the UK property rich condition, and Regulation 19 applied to the RIF, the relevant date is the date on which the RIF first ceased to meet this condition.

If the effective date of the land transaction occurred when the RIF relied on the grace period in Regulation 9 to meet the GDO condition or the non-close condition, and SDLT seeding relief was withdrawn because the RIF ceased to be a RIF as it was no longer able to rely on Regulation 9 to meet one of those conditions, the relevant date is the effective date of the land transaction.

11.7 Stamp Taxes on Shares (STS) — Stamp Duty and Stamp Duty Reserve Tax (SDRT)

Stamp Duty and SDRT exemptions apply to transfers of stock or marketable securities or agreements to transfer chargeable securities to RIF depositaries where the only consideration is the issue of units in the RIF. This exemption ensures that the initial set-up of an RIF does not incur an STS charge, facilitating the efficient establishment of these investment vehicles. Additional exemptions cover transfers of stock or marketable securities or agreements to transfer chargeable securities between sub-schemes of an umbrella RIF, allowing for flexibility in fund administration without triggering tax charges.

Transfers of units or agreements to transfer units in a RIF are also exempt from STS.

To qualify for these exemptions, the transfers or agreements to transfer must not form part of arrangements of which the main purpose, or one of the main purposes, is the avoidance of STS.

STS applies in the normal way to acquisitions of securities by a RIF.

11.8 Ceasing to be a RIF

If a scheme ceases to be a RIF, then the STS exemptions will not apply to any further transactions undertaken by the scheme.