The UK Property Rich Collective Investment Vehicles (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2020

Publication Date:January 01, 2020
 
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2020No. 315

CAPITAL GAINS TAX

CORPORATION TAX

The UK Property Rich Collective Investment Vehicles (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2020

Made17thMarch2020

Laid before the House of Commons19thMarch2020

Coming into force10thApril2020

The Treasury make the following Regulations in exercise of the powers conferred by paragraph 48 of Schedule 5AAA to the Taxation of Chargeable Gains Act 1992( 1).

Citation, commencement and effect

1.—(1) These Regulations may be cited as the UK Property Rich Collective Investment Vehicles (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2020 and come into force on 10th April 2020.

(2) The amendments made by regulations 3(a), 11(b) and (c), 12 and 14 have effect in relation to disposals made on or after the day on which these Regulations come into force.

(3) The amendments made by regulations 5 to 7, 10, 11(a), 13, 15, 16 and 20 have effect in relation to disposals made on or after 6th April 2019.

(4) The amendments made by regulations 8 and 9 have effect in relation to elections made on or after the day on which these Regulations come into force.

Amendment of Schedule 5AAA to the Taxation of Chargeable Gains Act 1992

2. Schedule 5AAA to the Taxation of Chargeable Gains Act 1992 (UK property rich collective investment vehicles etc) is amended as follows.

3. In paragraph 1 (meaning of collective investment vehicle etc)—

(a) in sub-paragraph (1)(c), for “a UK REIT” substitute “a company UK REIT or is the principal company of a group UK REIT”,

(b) in sub-paragraph (1), for paragraph (d) (and the “or” before it) substitute—

“(d) a company which—

(i) is resident outside the United Kingdom,

(ii) is not a member of a group, and

(iii) meets the property income condition,

(e) a company which—

(i) is resident outside the United Kingdom,

(ii) is the principal company of a group,

(iii) is not a close company or is a close company but only because it has a qualifying investor as a direct or indirect participator, and

(iv) meets the property income condition, or

(f) a company which—

(i) is resident outside the United Kingdom,

(ii) is a member of a group but is not the principal company of the group,

(iii) is a close company but only because it has a qualifying investor, or a company wholly (or almost wholly) owned by qualifying investors, as a direct participator, and

(iv) meets the property income condition.”,

(c) in sub-paragraph (2)—

(i) in the opening words, after “property income condition” insert “for the purposes of sub-paragraph (1)(d)”,

(ii) in paragraph (b), for “is property income from long-term investments” substitute “derives directly or indirectly from long-term property investments”,

(iii) in paragraph (c), for “property income from long-term investments and does so” substitute “profits from long-term property investments”, and

(iv) in paragraph (d) for “that income” to the end substitute “its profits under the law of any territory in which it is resident so far as the profits derive directly or indirectly from long-term property investments.”,

(d) after that sub-paragraph insert—

“(2A) A company meets the property income condition for the purposes of sub-paragraph (1)(e) or (f) if—

(a) at least half of the income of the group derives directly or indirectly from long-term property investments,

(b) all, or substantially all, of the group's profits from long-term property investments are distributed on an annual basis, and

(c) the company is not liable to tax on its profits under the law of any territory in which it is resident so far as the profits derive directly or indirectly from long-term property investments.”,

(e) in sub-paragraph (3) for “sub-paragraph (2)(a)” substitute “this paragraph but, for the purposes of sub-paragraph (1)(f)(iii), paragraph 46 has effect as if sub-paragraph (3)(c) were omitted”,

(f) in sub-paragraph (4), for the words from the beginning to “deriving from” substitute “For the purposes of this paragraph “long-term property investments” means”,

(g) in sub-paragraph (7)—

(i) after the “and” following the definition of “AIF” insert—

““profits” does not include profits of a capital nature.”

, and

(ii) omit the definition of “UK REIT”, and

(h) after that sub-paragraph insert—

“(8) For the purposes of this paragraph whether a company is a member of a group, or is the principal company of a group, is determined in accordance with section 170.”.

4. In paragraph 3 (meaning of a collective investment vehicle being “UK property rich” etc), in sub-paragraphs (1) and (4), after “Schedule 1A” insert “(but without regard to paragraphs 5 and 6 of that Schedule)”.

5. In paragraph 6(8) (disposals by non-UK residents), for “schemes” substitute “vehicles”.

6. In paragraph 7(5) (disposals by non-UK residents)—

(a) in paragraph (a), for “conditions A to C of regulation 75” substitute “the conditions in regulation 75(2), (3) and (4)(a)”,

(b) in paragraph (b), at the end insert “(assuming for this purpose that regulation 75(4)(b) is omitted)”, and

(c) in the words after that paragraph, at the end insert “(and see also paragraphs 46A and 51)”.

7. In paragraph 8 (election for collective investment vehicle to be treated as partnership), for sub-paragraph (4) substitute—

“(4) Section 12AA of the Management Act( 2) applies as a result of sub-paragraph (2) but as if —

(a) subsection (1) of that section authorised the giving of a notice under subsection (2) or (3) for the purpose of facilitating the amount in which each partner is chargeable to tax on chargeable gains,

(b) that section authorised the giving of the notice to the manager of the vehicle, and

(c) that section authorised a single notice under subsection (2) or (3) of that section requiring the making and delivery, in accordance with the notice, of a return every year (whether or not any partnership property has been disposed of in the period to which the return relates).”.

8. In paragraph 9 (further provision about election), at the end insert—

“(4) An election under paragraph 8 must include the following information in the case of each participant in the vehicle—

(a) the participant's name and, if the participant has one, the participant's unique taxpayer reference,

(b) the participant's usual or last known place of residence or the participant's place of business, and

(c) in the case of a participant who is an individual, the participant's date of birth.”.

9. In paragraph 12 (exemption for qualifying offshore CIV that is UK property rich etc)—

(a) in sub-paragraph (3)(a), after “(or almost wholly)” insert “and directly”, and

(b) after sub-paragraph (3) insert—

“(3A) In sub-paragraph (3)(a) the reference to direct ownership by a collective investment scheme is to ownership otherwise than through—

(a) a company, or

(b) a partnership, trust or other entity or arrangements.”.

10. In paragraph 13 (qualifying conditions)—

(a) in sub-paragraph (1), after paragraph (a) insert—

“(ab) it is a collective investment scheme, it meets the UK tax condition and it is wholly (or almost wholly) owned by one or more other collective investment schemes each of which meets the genuine diversity of ownership condition,”,

(b) in sub-paragraph (2), for paragraph (b) substitute—

“(b) the collective investment scheme directly owning the company—

(i) meets the genuine diversity of ownership condition, or

(ii) is wholly (or almost wholly) and directly owned by one or more qualifying partnerships each of which meets the genuine diversity of ownership condition,”,

(c) after sub-paragraph (2) insert—

“(2A) In sub-paragraph (2)(b)—

(a) references to direct ownership are to ownership otherwise than through—

(i) a company, or

(ii) a partnership, trust or other entity or arrangements, and

(b) “qualifying partnership” means a collective investment scheme which is constituted by two or more persons carrying on a trade or business in partnership.”,

(d) in sub-paragraph (3)—

(i) in paragraph (a), for “conditions A to C of regulation 75” substitute “the conditions in regulation 75(2), (3), and (4)(a)”,

(ii) in paragraph (b), at the end insert “(assuming for this purpose that regulation 75(4)(b) is omitted)”, and

(iii) in the words after that paragraph, at the end insert “(and see also paragraphs 46A and 51)”, and

(e) at the end insert—

“(8) If any of the proceeds arise to a company which is wholly (or almost wholly) owned by one or more investors to which paragraph 33 applies, the company is to be treated for the purposes of sub-paragraph (7) as if it were exempt from corporation tax in respect of chargeable gains accruing to it otherwise than as a result of double taxation arrangements.”.

11. In paragraph 21 (deemed disposal: payments not otherwise taxable where value derived from direct or indirect disposals of UK land)—

(a) in sub-paragraph (1)(c), at the end insert “(whether in the case of the participant or anyone else)”,

(b) in sub-paragraph (3)(a), for “the company” substitute “the relevant entity”, and

(c) at the end insert—

“(5) In this paragraph “the relevant entity” means—

(a) in a case where the relevant fund is constituted by a CoACS (within the meaning of paragraph 12), the CoACs, and

(b) in any other case, the qualifying company.”.

12. In paragraph 22 (deemed disposal if election ceases to have effect)—

(a) in sub-paragraph (3)(a), for “the company” substitute “the relevant entity”, and

(b) at the end insert—

“(4) In this paragraph “the relevant entity” has the same meaning as in paragraph 21.”.

13. In paragraph 33 (exemption for disposals by companies wholly owned by certain investors)—

(a) for sub-paragraphs (1) and (2) substitute—

“(1) This paragraph applies in the case of—

(a) a collective investment vehicle in respect of which an election under paragraph 8 has been made (a “transparent fund”),

(b) a qualifying fund or qualifying company in respect of which an election under paragraph 12 has been made,

(c) a company which is a company UK REIT or is the principal...

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