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 2021 and come into force on 24th March 2021.

(2) The amendments made by regulations 6, 8 and 9 have effect in relation to disposals made on or after 6th April 2019.

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), after sub-paragraph (2A) insert—

“ (2B) References to the group in sub-paragraph (2A) are to be read, in a case where that sub-paragraph applies for the purposes of sub-paragraph (1)(f), as references to—

(a) the group that, if section 170(4) is ignored, would be the group of which the company is the principal company, or

(b) the company (if there would be no group under paragraph (a)). ” .

4. —(1)Paragraph 6 (disposals by non-UK residents) is amended as follows.

(2) In sub-paragraph (6), for paragraph (b) and the “and” before it substitute—

“ (b) the vehicle is UK property rich,

(c) the vehicle together with one or more other collective investment vehicles have a 50% investment in the company, and

(d) each of those other collective investment vehicles is also UK property rich. ” .

(3) In sub-paragraph (9), at the end insert “, paragraph 7A (overseas life insurance companies) and paragraph 7B (offshore collective investment vehicles (other than UK feeder vehicles) that meet the conditions in paragraph 7(2)(a) and (b))”.

5. In paragraph 7(2) (appropriate connection to disposals within paragraph 6), for “the vehicle mentioned in paragraph 6(3)(a) or (5) or (6), or each of the vehicles mentioned in paragraph 6(3)(b),” substitute “the vehicle mentioned in paragraph 6(3)(a) or (5), or each of the vehicles mentioned in paragraph 6(3)(b) or (6),”.

6. After paragraph 7 insert—

“ Overseas life insurance companies

7A. —(1) Paragraph 6 does not apply if—

(a) the person making the disposal (“D”) is an overseas life insurance company or would be such a company if it were carrying on its life assurance business in the United Kingdom through a permanent establishment there,

(b) immediately before the disposal, no more than 40% of the market value of D’s assets derives from investments consisting of—

(i) interests in UK land, or

(ii) rights or interests in companies which are UK property rich,

(c) the asset disposed of is a right or interest in a collective investment vehicle that is a company (whether as a result of paragraph 4 or otherwise) and is UK property rich, and

(d) immediately before the disposal, D does not have a 10% investment in that vehicle.

(2) D has a 10% investment in a collective investment vehicle if, applying the rule in paragraph 9 (but without regard to paragraph 10) of Schedule 1A as if references to 25% were references to 10%, D would be regarded as having a 10% investment in the vehicle.

Offshore collective investment vehicles (other than UK feeder vehicles) that meet the conditions in paragraph 7(2)(a) and (b)

7B. —(1) Paragraph 6 does not apply if—

(a) the person making the disposal is an offshore collective investment vehicle which meets the conditions in paragraph 7(2)(a) and (b),

(b) immediately before the disposal, the offshore collective investment vehicle is not a UK feeder vehicle,

(c) the asset disposed of is a right or interest in a collective investment vehicle that is a company (whether as a result of paragraph 4 or otherwise) and is UK property rich (a “UK property rich vehicle”), and

(d) immediately before the disposal, the offshore collective investment vehicle does not have a 10% investment in the UK property rich vehicle.

(2) An offshore collective investment vehicle is a “UK feeder vehicle” at any time if at least 85% of the market value of the assets of the vehicle at that time derives from units in a single collective investment vehicle that is UK property rich.

(3) An offshore collective investment vehicle has a 10% investment in a UK property rich vehicle if, applying the rule in paragraph 9 (but without regard to paragraph 10) of Schedule 1A as if references to 25% were references to 10%, the offshore collective investment vehicle would be regarded as having a 10% investment in the UK property rich vehicle. ” .

7. In paragraph 12(7) (exemption for qualifying offshore CIV that is UK property rich etc), after “sub-paragraph (3)(a)” insert “or (c)”.

8. —(1)Paragraph 21 (deemed disposal: payments not otherwise taxable where value derived from direct or indirect disposals of UK land) is amended as follows.

(2) In sub-paragraph (1)—

(a) omit the “and” before paragraph (c),

(b) in that paragraph, omit “(whether in the case of the participant or anyone else)”, and

(c) at the end of that paragraph insert—

“ , and

(d) some or all of the value which is represented by the amount does not fall to be taken into account for the purposes of income tax or corporation tax on income. ” .

(3) In sub-paragraphs (2)(a) and (3)(a), after “that time” insert “(as adjusted, if applicable, in accordance with sub-paragraph (3A))”.

(4) After sub-paragraph (3) insert—

“ (3A) If some of the value (“the taxed value”) which is represented by the amount falls to be taken into account for the purposes of income tax or corporation tax on income, the market value mentioned in sub-paragraph (2)(a) or (3)(a) is to be reduced by so much of that market value as, on a just and reasonable basis, can be attributable to the taxed value. ” .

9. In paragraph 23 (gains accruing on disposals under paragraph 21 or 22), at the end insert—

“ (9) In the case of a disposal under paragraph 21 where there is a reduction in market value under sub-paragraph (3A) of that paragraph, a reduction is also to be made for the purposes of this paragraph to the amount of the receipt mentioned in paragraph 21(1) on a just and reasonable basis. ” .

10. The amendment made by regulation 3 does not affect an election made under paragraph 12(3) of Schedule 5AAA to the Taxation of Chargeable Gains Act 1992 before 24th March 2021.