IFM09665 - Ceasing to be a RIF: Cessation notice given to RIF operator - Regulation 24: Example
The operator of RIF XYZ has an accounting period ending 31 December 2026. The operator must provide the required information to HMRC within 6 months of that date, that is by 30 June 2027 (the IRD) but does not do so until 20 August 2027. There is no reasonable excuse for the failure, but the operator has not previously committed a ‘minor breach’ (that is, submitted the information late but within 6 months of the IRD) and so no cessation notice will be issued on this occasion.
The operator then sends the required information for the accounting period ending 31 December 2027 on 31 January 2029, which is 7 months after the IRD of 30 June 2028, and again without reasonable excuse. Because the information is received more than 6 months late, a cessation notice will be issued. A notice would be issued where the information is more than 6 months late even if there has not previously been a minor breach as in this example. The operator could appeal against the notice within 30 days beginning with the day on which the notice was given to the operator. When an appeal is made by the RIF, the cessation notice is effectively set aside until the appeal is determined or withdrawn. Any appeal will be determined on the question of whether the operator of the RIF had a reasonable excuse for the failure to provide the required information.
A cessation notice will also be issued where the operator of a RIF fails to provide information required by a notice under Regulation 38 to HMRC before the last day of the period allowed, and there has been no successful appeal against the notice. There is no separate appeal process against the issue of the cessation notice, as the original information notice is itself appealable.
A notice issued in order to safeguard the public revenue may only be given by a designated officer of HMRC, who will be a senior official with at least deputy director status. A notice will only be issued after careful consideration of the facts, and it is appealable within 30 days of being given. Any appeal will be determined on the question of whether it was reasonable for the officer to give the notice in order to safeguard the public revenue.
In general, HMRC expect that the use of the power in Regulation 24(1)(d) to issue a cessation notice to protect the public revenue will only be used in exceptional circumstances. The gateway tests into the regime should ensure that only genuine commercial investment arrangements are within the regime, and HMRC will not issue a notice except in response to a set of arrangements undertaken by the operator of a RIF or its investors where tax avoidance is the main object, or one of the main objects, of those arrangements.
A cessation notice will be issued where a required notification has not been given by the operator of a RIF in respect of one or more breaches of the qualifying conditions. This provision is necessary to have an effective way to address failures by operators to identify or notify such breaches. Such a notice is appealable within 30 days of it being given. Any appeal will be determined on the question of whether the RIF has breached one or more of the qualifying conditions.