C2.1164 Property rich collective investment vehicles—transparency election
It is possible for offshore CIVs that are UK property rich and are transparent for income tax purposes to elect to also be treated as tax transparent for capital gains purposes. The election will therefore be applicable to entities such as 'Baker' unit trusts, Luxembourg or French fonds commun du placement (FCPs), and Irish common contractual funds (CCFs)1 The election is not relevant in the case of partnerships that are CIVs, who are already transparent for both income and gains2.
The effect of the transparency election is to treat the offshore CIV as a partnership for the purposes of capital gains (and related provisions)3, which means that:
• the CIV itself is not within the charge to tax on its gains, and
• an interest in the CIV is not an asset for capital gains purposes, so investors in the CIV are taxed on disposals of the underlying assets of the partnership and not on a disposal of their interest in the CIV itself
An investor who is exempt from capital gains will therefore be able to directly make use of that exemption on disposal of assets by the CIV, because for capital gains purposes they will be treated as disposing directly of those assets rather than the disposal being made by the CIV itself.
The making of the election is subject to the CIV being UK property rich at the time of the election, or having published scheme documents at that time clearly stating the