IFM09335 - Taxation of investors: Chargeable gains: Co-ownership schemes that are neither a RIF or CoACS
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.