C2.1163 Property rich collective investment vehicles—indirect disposals
For the latest New Development, see ND.1809.
Non-UK resident CIVs which are UK property rich are treated as companies, and interests in them as shares, which means that disposals by non-resident investors in such entities on or after 6 April 2019 are chargeable in the same way as a disposal of an interest in a UK property rich company1.
There is a two-part test to determine if an indirect disposal of an interest in a CIV by a non-resident person is chargeable to tax2:
• firstly, the disposal must be of a UK property rich asset (ie one that derives at least 75% of its value from UK land — determined in the same way as set out at C2.1151), and
• secondly, the disposal must have an 'appropriate connection' to a CIV (this is broader than just disposals of interest in the CIV itself (see below))
Typically, there is an exemption from the charge to tax on indirect disposals of UK land by non-resident investors where the person holds less than a substantial indirect interest (broadly, an investment of 25%).
However, this exemption is not available in the case of investment in collective investment vehicles (both offshore and UK resident CIVs) except in very limited circumstances.
HMRC state that a significant part of the reason for the 25% exemption was to remove from charge investors who have insufficient knowledge of the entity invested in to assess whether it is property rich3. However, they