IFM09650 - Ceasing to be a RIF: Declaration by designated HMRC officer that a RIF is treated as if entry notice had never been given - Regulation 23
The operator of a RIF must make certain ‘relevant declarations’ under provisions in Regulations 4, 9, and 13 (IFM09420). In broad terms, the declarations relate to:
- an intention that a scheme will, on entering the RIF regime, remain a RIF unless it winds up or converts to an authorised co-ownership scheme, and cases where a condition is treated as met for an initial period, AND
- where a condition is treated as met for an initial period, there is an intention and reasonable expectation that the scheme will in fact meet the condition within 12 months
Regulation 23 provides that a designated HMRC officer must issue a determination notice that a RIF is to be treated as if the entry notice had never been given if that officer has reasonable grounds to believe that the operator of the RIF did not have the intention referred to in the declaration, or could not reasonably have had the expectation referred to in the declaration. In assessing whether there are ‘reasonable grounds,’ the designated officer will consider the available evidence and will reach their conclusion based on that evidence.
The purpose of the provisions is to prevent co-ownership contractual schemes intentionally entering the RIF regime for a temporary period in order to obtain the regulatory and tax advantages available (for example, limited liability for participants and opacity for Stamp Duty Land Tax purposes) and then enjoying those benefits outside of the rules relating to RIFs.
A determination may only be made where a scheme has been a RIF for a continuous period of less than 2 years at the time that it ceases to be a RIF as a result of ceasing to meet a qualifying condition or by the operator giving an exit notice in relation to the scheme.
Determinations may only be made by a designated HMRC officer, who will be a senior official with at least deputy director status. A determination notice must include the date of the determination and the reasons for the determination. There is an appeal process available as set out in Regulation 23.
A RIF operator must notify each of the participants in the RIF within 30 days of a Determination notice being issued. A failure to comply with this notification requirements within the prescribed time limit may be liable to a penalty (IFM09760).
Determination notices are a different process to ‘cessation notices.’