CG73996J - UK property rich collective investment vehicles: Introduction: Overview of elections for transparency or exemption

The default position outlined in CG73996G would result in the problems set out at CG73996A. Schedule 5AAA addresses those problems for UK property rich CIVs by providing, subject to certain conditions, for them to make elections, as follows.

An offshore CIV that is transparent for income tax purposes, but is not constituted as a partnership, may elect to be treated as a partnership for capital gains purposes (so, a CIV that makes the election will also be transparent for capital gains purposes - see TCGA92/SCH5AAA/paragraph 8 and CG73997P) – the transparency election.

Offshore CIVs may elect to be treated as exempt from Corporation Tax on chargeable gains accruing on all direct and indirect disposals of land (see TCGA92/SCH5AAA/paragraph 12 and CG73998J) – the exemption election.

This exemption election cannot be made by an alternative investment fund (‘AIF’) that does not meet the definition of CIV for another reason (otherwise, offshore property companies would have less onerous conditions to meet in order to qualify for exemption than those UK resident companies are required to meet in order to be treated as UK Real Estate Investment Trusts (UK REITs)).

Paragraph 12 also provides that limited partnerships (including UK based ones) that come within the definition of a collective investment scheme at section 235 Financial Services and Markets Act 2000, CIVs that have elected to be treated as ‘deemed’ partnerships under paragraph 8 (see CG73998S), and UK co-ownership contractual schemes, may make an exemption election in respect of companies in their ownership chain which are not CIVs.

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