Property authorised investment funds (Property AIFs): process and effects of entry into the Property AIF regime: quashing notices
Under regulation 69R SI 2006/964 if, on receipt of the notification to join the regime, the company or proposed company does not fulfil the notification condition, ie it has not sent in the required documentation as specified under the process of entry or has failed to meet the entry conditions, then a quashing notice will be issued by HMRC to deny the open ended investment company (OEIC) company or proposed OEIC entry into the Property AIF regime.
However, before a quashing notice can be issued, HMRC must issue a ‘preliminary notice’ (regulation 69S SI 2006/964) within 28 days of receipt of the notice from an OEIC or proposed OEIC to inform the manager or applicant (from the proposed company) the reasons why a quashing notice could be issued. HMRC must then give the applicant a period of 28 days to address the concerns or rectify the matters set out in the preliminary notice.
However, this period can be extended if the manager (or applicant) agrees with HMRC what amendments are required, but also reasonably considers that these will take longer than 28 days to effect. Subject to HMRC’s acceptance of the time proposed, an extension may be agreed as set out in regulation 69S(7) to (9) SI 2006/964. This extension must be agreed within the original 28 day period.
If the manager or proposed manager does not address the issues raised in the preliminary notice within 28 days of its issue (or any longer agreed period), HMRC will issue a quashing notice.
If the manager, or proposed manager, adequately addresses the matters or demonstrates satisfactorily to HMRC that the concerns were not valid in the preliminary notice, within 28 days of its issue (or any agreed longer period), then the OEIC or proposed OEIC will be able to join the regime in the normal way, although possibly at a later day than originally proposed.
When a preliminary notice is issued and until HMRC have given notice that they are satisfied that the matters specified in that notice have been rectified, the company or proposed company will not be able to enter the Property AIF regime. If a quashing notice is issued then the company may not enter the Property AIF regime unless and until an appeal is determined in its favour.
Appeals against quashing notices (regulation 69T SI 2006/964)
When a quashing notice is issued then, if the recipient considers that it was not issued correctly, there is a right of appeal against it. However if a quashing notice is issued then until any appeal has been determined the OEIC or proposed OEIC will not be able to enter the Property AIF regime.
A notice of appeal must be given to HMRC within 28 days, beginning with the day on which the quashing notice was given.
If an appeal is later notified to the tribunal, the tribunal will determine whether the issue of the quashing notice is just and reasonable. If it allows the appeal, the tribunal may direct when that the OEIC or proposed OEIC should come within the Property AIFs regime. It may also specify the date from which admission should apply.
Re-application to join the Property AIF regime following a quashing notice
An OEIC which has received a quashing notice is not prevented from giving a further notice to join the regime. However, when giving notice it is important that the OEIC ensures that it has addressed the issues that led to the original quashing notice. Therefore, it is recommended that any subsequent notice should include a summary outlining the changes that have been made to address the original quashing notice.