Investment Funds Manual

IFM09350 - Taxation of investors: Chargeable gains: Deemed disposal: time at which gains accrue

In some circumstances, a gain on a deemed disposal is brought into charge immediately. In other cases, Regulation 26 provides for gains on the occasion of certain deemed disposals to be deferred and brought into charge at some time later. When Regulation 26 applies, the appropriate proportion of the deemed gain will always be treated as accruing at the time of an actual disposal with the remainder of the deemed gain accruing no later than at the end of a three-year period beginning with the time of the deemed disposal.

The table below summarises the main occasions on which a deemed disposal may arise and when a gain on that deemed disposal is treated as accruing. It is intended as a summary only. Regulation 26 should be consulted for the detailed rules, including the rules for cases where a gain is brought into charge immediately and the rules preventing the same economic gain from being charged more than once.

Occasion of deemed disposal	Time gain treated as accruing
1. At the time when 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) (IFM09510)	on an actual disposal, the appropriate portion of the deemed gain is treated as accruing to the person at the time of the actual disposal; the remainder of the deemed gain accrues on the earlier of: when the RIF winds up; on the date in the exit notice; or  three years after the deemed disposal
2. At the time when 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) (IFM09530)	on an actual disposal, the appropriate portion of the deemed gain is treated as accruing to the person at the time of the actual disposal; the remainder of the deemed gain accrues on the earlier of: when the RIF winds up or on the date in the exit notice
3. At the time when a RIF breaches the restriction requirement and that is rectified before 9 months after the breach – Regulation 18(4) (IFM09540)	on an actual disposal, the appropriate portion of the deemed gain is treated as accruing to the person at the time of the actual disposal; the remainder of the deemed gain accrues on the earlier of: when the RIF winds up or on the date in the exit notice
4. At the time when a RIF ceases to meet the UK property rich condition during its winding up period – Regulation 19(2)  (IFM09550)	on an actual disposal, the appropriate portion of the deemed gain is treated as accruing to the person at the time of the actual disposal; the remainder of the deemed gain accrues on the earlier of: when the RIF winds up or on the date in the exit notice
5. At the time when a RIF ceases to be a RIF (IFM09680) as a result of ceasing to meet one or more of the qualifying conditions (IFM09205) – Regulation 25(1)	on an actual disposal, the appropriate portion of the deemed gain is treated as accruing to the person at the time of the actual disposal; the remainder of the deemed gain accrues on the earlier of: when the RIF winds up; on the date in the exit notice; or three years after the deemed disposal

Where there is an actual disposal, Regulation 26 brings into charge the appropriate portion of the deemed gain, rather than necessarily the whole deemed gain. Regulation 26 contains rules to ensure gains charged cannot exceed the overall total gains. If some of the deemed gain has accrued on one or more previous occasions, the appropriate portion is restricted so that, when added to the appropriate portion or portions on the previous occasion or occasions, it does not exceed 100%.