IFM09530 - Changes in and Breaches of Qualifying conditions and notification requirements: Breaches of qualifying conditions: breaches of ownership condition
The ownership requirement is met at any time that a scheme meets either the genuine diversity of ownership condition or the non-close condition. When the requirement is breached, Regulation 16 provides that the requirement will be treated as if it continued to be met until the earlier of:
- The end of a period of 9 months beginning with the day on which the breach occurred.
- The beginning of the day on which it becomes apparent to the operator of the RIF that there is no reasonable expectation of the RIF rectifying the breach by the end of the 9 month period, and in such cases the operator of the RIF must notify HMRC of that fact within 30 days (Regulation 16(2)).
Where the breach is rectified before the end of the 9 month period, but more than 30 days after the date on which the breach occurred, each participant in the RIF is deemed for the purposes of TCGA 1992 to have sold and reacquired their units in the RIF at market value immediately before the time of the breach, and the operator of the RIF must notify each participant accordingly within 30 days from the day the breach was rectified (Regulation 16(5)).
A RIF operator failing to comply with the notification requirements in Reg 16(2) and (5) within the prescribed time limit may be liable to a penalty (IFM09770).
Regulation 17 provides that where a RIF breaches the ownership requirement 5 or more times in any period of 12 months, there is a deemed disposal for participants where the breach is rectified at any point before the end of the 9 month period, including where rectified within 30 days after the date on which the breach occurred.