CG73996A - UK property rich collective investment vehicles: Introduction

HMRC policy with regard to taxation of investors and CIVs generally is to tax returns to investors in a way that provides a similar outcome to direct investment in the underlying assets.

Prior to April 2019, the capital gains of non-resident CIVs and their investors were only within the scope of UK tax in limited circumstances (broadly, where CIVs were closely held). From April 2019, the default position is that all non-UK resident CIVs, except for those constituted as partnerships, are brought into charge. Schedule 5AAA contains provisions to address areas of difficulty that would potentially arise for CIVs and their investors under the core rules on disposals of interests in UK land (see CG73997D onwards), in particular –

• Exempt investors would indirectly suffer tax where a CIV, or entities that a CIV is invested in, became liable to tax on gains made on disposals of UK property interests; and

• Investors, whether exempt or not, could indirectly suffer from multiple charges to tax arising to UK property rich CIVs, or entities such a CIV invested in, (for example, when a gain arose for a special purpose vehicle in the fund structure disposing of a property, and again when the CIV disposed of an intermediate holding company above that SPV); non-exempt UK and non-resident investors would also be liable to tax on any gains on a disposal of their interest in the CIV.

The rules in Schedule 5AAA address these points by providing for two forms of election that effectively move the tax point to the investor (see CG73997P and CG73998J). The Schedule also provides the default framework for how the rules for taxing non-residents’ gains on disposals of interests in UK land apply to CIVs.

See CG73996N for the definition of “collective investment vehicle”.