HMRC provide their initial guidance on the Reserved Investor Fund rules.
HMRC published a technical note on the new Reserved Investor Fund (RIF) on 17 September 2025 to help RIFs and their investors before fuller material can be added to the Investment Funds Manual. It is based on the legislation in the Co-ownership Contractual Schemes (Tax) Regulations, SI 2025/200, broadly following its order but expanding on it and providing examples.
RIFs are a new form of UK unauthorised investment fund, structured as contractual co-ownership schemes similar to authorised CoACSs, but without FCA product authorisation, and they can also be in umbrella form. Only the fund manager (AIFM) and depositary are regulated, akin to the Luxembourg RAIF FCP model. RIFs may be marketed to institutional and professional investors, and, potentially certain individuals. They are intended to be more flexible and cost-effective than CoACSs, but still require a UK depositary and must qualify as AIFs under the UK AIFMD regime, which brings regulatory and compliance obligations.
The basic tax position of RIFs is straightforward. Provided they meet qualifying tax conditions, being co-ownership schemes, they are tax-transparent for income purposes, so their income is taxable on their investors. Their units are treated as chargeable assets for UK CGT, enabling deferral of tax on portfolio gains until disposal. RIFs benefit from special stamp tax rules: transfers of units are exempt from stamp duty and SDRT, and the fund is treated as a company for SDLT purposes, with SDLT payable by the fund itself. However, as unauthorised funds, RIFs do not benefit from the VAT exemption on fund management services.
There are four qualifying conditions, with the first being that the scheme is UK-based. Secondly, the regulations require RIFs to satisfy either the genuine diversity of ownership requirements in the case of open-ended funds or the non-close requirement (modelled on the REITs one) aimed at closed-ended ones. The fourth is that the scheme satisfies various regulatory requirements, in particular that it is not a CoACS, it is an AIF and meets the marketing conditions summarised above. Essentially, these conditions limit the use of RIFs to being fund vehicles, as opposed to being available for use as a UK special purpose vehicle in the way that Jersey property unit trusts often are (though it would be good if this should become possible in a RIF 2.0).
The third condition addresses a complicating factor, being the necessity of avoiding damaging the integrity of the non-resident CGT regime for UK property in TCGA 1992 Sch 5AAA, which post-dated CoACSs. RIFs must satisfy one (or more) of the restriction conditions:
The non-UK property assets condition requires that it must neither hold interests in UK land nor assets deriving 75% or more of their value from UK land, with a safe harbour intended to cover pan-European and global property funds.
The UK property-rich condition requires it to be ‘UK property-rich’ as per TCGA 1992 Sch 5AAA (and also meet a UK tax condition).
Thirdly, all the unit holders may be exempt from UK capital gains tax or corporation tax on chargeable gains (as appropriate), other than by non-residence.
In CoACSs, their special tax status is effectively ring-fenced for HMRC by their FCA authorisation. RIFs, being unauthorised and subject to the qualifying conditions, are different in this regard, so that there are specific provisions to cover both the entry to, and exit from, the special tax regime. The regulations regarding entry to the regime (including the grace period) are covered in the technical note, which helpfully links to an online form HMRC have developed for the purpose. The note covers the provisions regarding changes in and breaches of the qualifying conditions and also exiting the RIF regime (with a linked form for these). The amplification is to be welcomed as some are intended to
avoid cliff-edges.
The note also covers HMRC’s annual RIFs reporting requirements providing a linked form.
HMRC provide their initial guidance on the Reserved Investor Fund rules.
HMRC published a technical note on the new Reserved Investor Fund (RIF) on 17 September 2025 to help RIFs and their investors before fuller material can be added to the Investment Funds Manual. It is based on the legislation in the Co-ownership Contractual Schemes (Tax) Regulations, SI 2025/200, broadly following its order but expanding on it and providing examples.
RIFs are a new form of UK unauthorised investment fund, structured as contractual co-ownership schemes similar to authorised CoACSs, but without FCA product authorisation, and they can also be in umbrella form. Only the fund manager (AIFM) and depositary are regulated, akin to the Luxembourg RAIF FCP model. RIFs may be marketed to institutional and professional investors, and, potentially certain individuals. They are intended to be more flexible and cost-effective than CoACSs, but still require a UK depositary and must qualify as AIFs under the UK AIFMD regime, which brings regulatory and compliance obligations.
The basic tax position of RIFs is straightforward. Provided they meet qualifying tax conditions, being co-ownership schemes, they are tax-transparent for income purposes, so their income is taxable on their investors. Their units are treated as chargeable assets for UK CGT, enabling deferral of tax on portfolio gains until disposal. RIFs benefit from special stamp tax rules: transfers of units are exempt from stamp duty and SDRT, and the fund is treated as a company for SDLT purposes, with SDLT payable by the fund itself. However, as unauthorised funds, RIFs do not benefit from the VAT exemption on fund management services.
There are four qualifying conditions, with the first being that the scheme is UK-based. Secondly, the regulations require RIFs to satisfy either the genuine diversity of ownership requirements in the case of open-ended funds or the non-close requirement (modelled on the REITs one) aimed at closed-ended ones. The fourth is that the scheme satisfies various regulatory requirements, in particular that it is not a CoACS, it is an AIF and meets the marketing conditions summarised above. Essentially, these conditions limit the use of RIFs to being fund vehicles, as opposed to being available for use as a UK special purpose vehicle in the way that Jersey property unit trusts often are (though it would be good if this should become possible in a RIF 2.0).
The third condition addresses a complicating factor, being the necessity of avoiding damaging the integrity of the non-resident CGT regime for UK property in TCGA 1992 Sch 5AAA, which post-dated CoACSs. RIFs must satisfy one (or more) of the restriction conditions:
The non-UK property assets condition requires that it must neither hold interests in UK land nor assets deriving 75% or more of their value from UK land, with a safe harbour intended to cover pan-European and global property funds.
The UK property-rich condition requires it to be ‘UK property-rich’ as per TCGA 1992 Sch 5AAA (and also meet a UK tax condition).
Thirdly, all the unit holders may be exempt from UK capital gains tax or corporation tax on chargeable gains (as appropriate), other than by non-residence.
In CoACSs, their special tax status is effectively ring-fenced for HMRC by their FCA authorisation. RIFs, being unauthorised and subject to the qualifying conditions, are different in this regard, so that there are specific provisions to cover both the entry to, and exit from, the special tax regime. The regulations regarding entry to the regime (including the grace period) are covered in the technical note, which helpfully links to an online form HMRC have developed for the purpose. The note covers the provisions regarding changes in and breaches of the qualifying conditions and also exiting the RIF regime (with a linked form for these). The amplification is to be welcomed as some are intended to
avoid cliff-edges.
The note also covers HMRC’s annual RIFs reporting requirements providing a linked form.
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