IFM09510 - Changes in and Breaches of Qualifying conditions and notification requirements: Changes to restriction condition
A RIF’s entry notice remains valid provided at least one of the restriction conditions is satisfied, and a scheme’s status as a RIF is unaffected by any change in which specific restriction condition(s) it meets. Regulation 15(1) does, though, provide an obligation to notify participators and HMRC if there is a change in which of the restriction conditions the RIF relies on meeting. The notifications must be sent within a period of 30 days beginning with the day on which the change occurs.
There is no need to send notifications if a scheme meets 2 restriction conditions at the same time but ceases to meet one of them, as the scheme continues to rely on one of those conditions. For example, a scheme may initially meet both the non-UK property assets condition and the exempt investor condition. There is no need to send notifications where it can continue to rely on either of those conditions, but there would be if it ceased to meet both of them and newly relied on meeting the UK property rich condition.
Regulation 15(4) provides that, where a co-ownership scheme’s status as a RIF depends on it meeting the UK property rich condition but it then ceases to meet that condition and instead relies on meeting the non-UK property assets condition, then each participant is deemed to have sold and reacquired their units in the RIF at their market value at that time. The operator of the RIF must notify each participant in the RIF of such deemed disposals within 30 days beginning with the day on which the RIF ceased to meet the UK property rich condition. Whilst the purpose of this deemed disposal is to ensure that non-UK resident participants are subject to tax on gains arising from UK property prior to the RIF ceasing to be UK property rich, after which non-residents would no longer have a chargeable interest, the deemed disposal applies to all participants.
A RIF operator failing to comply with the notification requirements in Reg 15(1) and (4) within the prescribed time limit may be liable to a penalty.