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Transparency and exemption elections for offshore CIVs disposing of UK property

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HMRC has published forms and guidance for collective investment vehicles (CIVs) making transparency and exemption elections to prevent multiple charges arising as a result of the new rules from April 2019 on disposals of UK immovable property by non-resident entities.

Since April 2019, gains made by non-residents on disposals of UK immovable property, including commercial property and indirect disposals by ‘property rich’ entities, have been subject to UK tax. The legislation included provision for two types of elections by collective investment vehicles (CIVs): the ‘transparency’ and ‘exemption’ elections.

The transparency election treats the offshore CIV as a partnership for capital gains purposes, ensuring that investors are taxed on disposals of the underlying assets of the partnership. Investors exempt from CGT would still benefit from that exemption on disposal of assets by the CIV, as the CIV itself will not be a taxable person. The election must made by the fund manager within 12 months of the CIV first acquiring a direct interest in UK land or an asset that is UK property rich. In the case of a fund existing at 6 April 2019, the election must be made by 5 April 2020. All investors in the fund at the time of making the election are required to have given consent.

The exemption election exempts the CIV from tax on its gains, although under that election the CIV remains a person and notionally chargeable to tax. The election is available to eligible CIVs meeting certain qualifying definitions and which commit to report certain information annually to HMRC. These reporting requirements may make the exemption election unattractive to some smaller joint venture arrangements.

The guides include:

  • elect an offshore CIV for tax transparency on UK capital gains;
  • elect an offshore CIV for tax exemption on UK capital gains;
  • elect a qualifying company for tax exemption on UK capital gains;
  • how to register and send exemption election reports to HMRC; and
  • exemption election report template.

See Transparency and exemption elections for collective investment vehicles

Issue: 1477
Categories: News