The Co-ownership Contractual Schemes (Tax) Regulations 2025

Chapter 5 Ceasing to be a RIF

Causes and timing

20.  Where a RIF ceases to be a RIF by virtue of ceasing to meet one or more of the qualifying conditions, the RIF ceases to be a RIF from the beginning of the first day on which it ceases to meet one or more of those conditions.

Breach of qualifying conditions: requirement to notify HMRC

21.—(1) Where a RIF breaches one or more qualifying conditions and as a result ceases to be a RIF, the operator of the RIF must notify HMRC in accordance with this regulation.

(2) Notice in respect of a breach of a qualifying condition in section 20(1)(a) to (c) of F(No.2)A 2024 or the UK-based condition must specify—

(a) the qualifying condition that the RIF has breached, and

(b) the date on which the breach occurred.

(3) Notice in respect of a breach of the ownership requirement or restriction requirement must specify—

(a) if the ownership requirement was breached, whether the RIF ceased to meet the genuine diversity of ownership condition or the non-close condition,

(b) if the restriction requirement was breached, the restriction condition that the RIF ceased to meet, and

(c) the date on which the breach occurred.

(4) A notice under this regulation must be given before the end of the period of 30 days beginning—

(a) in respect of a breach mentioned in paragraph (2), with the date on which the breach occurred,

(b) in respect of a breach mentioned in paragraph (3), with the date on which the 9 month period in relation to the breach came to an end.

(5) The operator of a RIF is not required to give notice in respect of a breach of a qualifying condition if, in relation to the breach, the operator has given a notice under regulation 9(3), 13(3), 16(2) or 18(3).

(6) In paragraph (4), “9 month period”—

(a) in relation to a breach of the ownership requirement, has the meaning it has in regulation 16;

(b) in relation to a breach of the restriction requirement, has the meaning it has in regulation 18.

Exit notices

22.—(1) The operator of a RIF may give an exit notice for the purpose of the scheme ceasing to be a RIF.

(2) An “exit notice” means a notice given to HMRC setting out—

(a) the date from which the scheme is to be treated as having ceased to be, or will cease to be, a RIF, and

(b) the reasons for the operator of the RIF’s decision that the scheme is to be treated as having ceased to be, or will cease to be, a RIF.

(3) An exit notice may be made at any time—

(a) prior to the date specified in the notice for the purposes of paragraph (2)(a), or

(b) before the end of the period of 3 months beginning with that date.

(4) The RIF will cease to be, or be treated as having ceased to be, a RIF from the beginning of the date specified in the exit notice.

Relevant declarations in entry notice

23.—(1) This regulation applies where—

(a) a RIF ceases to be a RIF as a result of ceasing to meet a qualifying condition or an exit notice being given in relation to the scheme, and

(b) the RIF has been a RIF for a continuous period of less than two years at the time that it ceases to be a RIF.

(2) A designated HMRC officer must determine that the RIF is to be treated as if the entry notice had never been given in relation to it where—

(a) a relevant declaration was made by an operator of a RIF in the entry notice given in relation to the RIF, and

(b) the designated HMRC officer has reasonable grounds to believe that the operator of the RIF—

(i) did not have the intention referred to in the declaration, or

(ii) could not reasonably have had the expectation referred to in the declaration.

(3) Where a determination under paragraph (2) is made, this does not affect any penalties imposed under regulation 40.

(4) Where a determination under paragraph (2) is made for a scheme to which regulation 28 applied—

(a) the determination does not affect any land transaction treated as occurring under that regulation,

(b) a land transaction which is the acquisition of chargeable interests by the participants in the scheme from the scheme is treated as occurring on the date the determination was made,

(c) any consideration in respect of the land transaction is disregarded for the purposes of paragraph 1 of Schedule 4 to FA 2003(1),

(d) paragraph 8 of Schedule 4 to FA 2003(2) does not apply to the land transaction, and

(e) the land transaction is not a notifiable transaction within the meaning given by section 77 FA 2003(3).

(5) A determination under paragraph (2) must be made by notice given by the designated HMRC officer to the operator of the RIF.

(6) A notice under paragraph (5) must include—

(a) the date of the determination, and

(b) the reasons for the determination.

(7) The operator of the RIF must notify each participant in the RIF of any determination under paragraph (2) within the period of 30 days beginning with the day on which the notice under paragraph (5) was given to the operator.

(8) The operator of the RIF may bring an appeal against a determination under paragraph (2).

(9) The appeal must be made by notice given to HMRC within the period of 30 days beginning with the day on which the notice of the determination was given to the operator of the RIF.

(10) Where a notice is given to HMRC, the scheme is to be treated as if the determination under paragraph (2) had not been made until the appeal is determined or withdrawn.

(11) On an appeal that is notified to the tribunal, the tribunal must determine whether the designated HMRC officer had reasonable grounds to make the determination.

(12) The tribunal may affirm or quash the determination.

(13) In this regulation—

“chargeable interests” has the meaning given by regulation 28(6)(a);

“designated HMRC officer” means an officer of HMRC who has been designated by the Commissioners for HMRC for the purposes of this regulation;

“relevant declaration” means a declaration under regulation 4(1)(e), 9(1)(b) or 13(1)(b).

Cessation notice

24.—(1) A notice (“a cessation notice”) must be given to the operator of a RIF by—

(a) an officer of HMRC if the operator of the RIF fails, without reasonable excuse, to provide information required under regulation 37 to HMRC before the end of a period of 6 months (“the 6 month period”) beginning with the day after the information reporting date,

(b) an officer of HMRC if the operator of the RIF provides information required under regulation 37 to HMRC within the 6 month period, but—

(i) the operator does not have a reasonable excuse for failing to provide the information on or before the information reporting date, and

(ii) the operator previously committed a minor breach of regulation 37,

(c) an officer of HMRC, if—

(i) the operator of the RIF fails to provide information required by a notice under regulation 38 to HMRC before the last day of the period of time specified for the purposes of that regulation, and

(ii) there has been no successful appeal against the notice.

(d) a designated HMRC officer, if the officer determines that it is reasonable to do so in order to safeguard the public revenue, or

(e) an officer of HMRC, if the officer of HMRC determines that a RIF has breached one or more qualifying conditions and the operator of the RIF has not given a notice under regulation 9(3), 13(3), 16(2), 18(3) or 21.

(2) A cessation notice must specify—

(a) the grounds for giving the notice, and

(b) for a notice given under paragraph (1)(d) or (e), the day from which the RIF is no longer a RIF, which may be a day earlier than the notice.

(3) Where a cessation notice is given under—

(a) paragraph (1)(a), (b) or (c) the RIF ceases to be a RIF from the beginning of the day on which the notice is given to the operator of the RIF;

(b) paragraph (1)(d) or (e), the RIF ceases to be a RIF from the beginning of the day specified in the notice.

(4) But a cessation notice under paragraph (1)(e) may not specify a day earlier than the first day of a period of 12 months ending with the date on which the notice was given.

(5) The operator of the scheme may bring an appeal against a cessation notice given under paragraph (1)(a), (b), (d) or (e) by giving a notice to HMRC within the period of 30 days beginning with the day on which the notice was given to the operator.

(6) Where a notice is given to HMRC, the RIF is to be treated as if the cessation notice had not been given until the appeal is determined or withdrawn.

(7) On an appeal that is notified to the tribunal, the tribunal must determine—

(a) for an appeal against a cessation notice given under paragraph (1)(a) or (b), whether the operator of the RIF had a reasonable excuse for the failure to provide required information;

(b) for an appeal against a cessation notice given under paragraph (1)(d), whether it was reasonable for the officer of HMRC to give the notice in order to safeguard the public revenue;

(c) for an appeal against a cessation notice given under paragraph (1)(e), whether the RIF has breached one or more of the qualifying conditions.

(8) The tribunal may affirm, vary or quash the cessation notice.

(9) In this paragraph—

“designated HMRC officer” means an officer of HMRC who has been designated by the Commissioners for HMRC for the purpose of giving cessation notices under paragraph (1)(d) of this regulation;

“minor breach” means that information required under regulation 37 was provided within the 6 month period.

Ceasing to be a RIF: deemed disposal of units

25.—(1) At any time that a RIF ceases to be a RIF, each participant in the RIF is deemed, for the purposes of TCGA 1992, to, immediately before that time, have—

(a) sold their units in the RIF, and

(b) reacquired those units,

at their market value at that time.

(2) But paragraph (1) does not apply to a RIF that meets the restriction condition in regulation 10(2)(a) or (c) and becomes an authorised co-ownership scheme.

(3) The operator of a RIF must notify each participant in the RIF of any deemed disposal of the participant’s units under paragraph (1).

(4) Notice under paragraph (3) must be given by the end of the period of 30 days beginning with the later of—

(a) the day on which the scheme ceases to be a RIF, or

(b) the day on which a notice is given to the operator of the RIF by HMRC in accordance with regulation 24(1).

Gains accruing on deemed disposals

26.—(1) This regulation applies if a disposal of units in a RIF is deemed to have been made by a person at any time under regulations 15(3), 16(4), 18(4), 19(2) or, where the disposal has occurred because the RIF ceased to meet one or more of the qualifying conditions, 25(1).

(2) Any gain (“the deemed gain”) accruing to the person on the deemed disposal is treated as accruing to the person in accordance with this regulation.

(3) If, at the time of the deemed disposal or a subsequent time, the person actually disposes of a unit in the scheme, the appropriate portion of the deemed gain is treated as accruing to the person at the time of the actual disposal.

(4) For this purpose “the appropriate portion” means the proportion which the consideration for the actual disposal bears to the amount of the deemed gain.

(5) If some of the deemed gain has accrued on one or more previous occasions, the appropriate portion is restricted so that, when added to the appropriate portion or portions on the previous occasion or occasions, it does not exceed 100%.

(6) In determining the appropriate proportion, so much, if any, of the consideration for the actual disposal as exceeds the amount of the deemed gain is to be ignored.

(7) The remainder of the deemed gain is treated as accruing to the person (unless the whole amount has already accrued)—

(a) where there is a deemed disposal under regulations 16(4), 18(4) or 19(2) at the earlier of—

(i) the RIF being wound up, or

(ii) the date in the exit notice given in relation to the RIF;

(b) where there is a deemed disposal under regulations 15(3) or, where the disposal has occurred because the RIF ceased to meet one or more of the qualifying conditions, 25(1) the earlier of—

(i) the end of the period of three years beginning with the time of the deemed disposal,

(ii) the RIF being wound up, or

(iii) the date in the exit notice given in relation to the RIF.

(1)

Paragraph 1 was amended by paragraph 4 of Schedule 1 to the Corporation Tax Act 2010 (c. 4).

(2)

Paragraph 8 was amended by section 301 of the Finance Act 2004 (c. 6) and the Scotland Act 2012 (c. 11).

(3)

Section 77 was amended by section 94 of the Finance Act 2008 (c. 9), paragraph 17 of Schedule 3 to the Scotland Act 2012, paragraph 5 of Schedule 39 to the Finance Act 2013 (c. 29) paragraph 9 of Schedule 1 to the Stamp Duty Land Tax Act 2015 (c. 1).