Reserved Investor Fund – release of final Regulations

On 25 February 2025, the Government published the final version of the Co-ownership Contractual Schemes (Tax) Regulations 2025 which implement the new Reserved Investor Fund (RIF) commencing from 19 March 2025. The RIF is a new UK unauthorised contractual scheme fund aimed at professional and institutional investors. The RIF is expected to be a suitable vehicle to hold UK real property, particularly commercial property, but the Government has confirmed that the fund will be able to invest in a wide range of asset classes beyond real estate. Much of the detail of the draft Regulations which were released last year for consultation have been included in the final Regulations.

A qualifying RIF is not subject to tax on its income or gains. The RIF is transparent for income so that income is treated as arising directly to the unit holders. The RIF is opaque for gains so that, from an investor’s perspective, the investor is only subject to tax on gains from its RIF investment on disposal of units in the RIF that fall within the scope of UK tax on capital gains.

The qualifying conditions for RIF status are that the collective investment vehicle must: (i) be UK based (i.e. broadly the operator and depository of the RIF which administer the RIF are bodies corporate incorporated in the UK and the deed is governed by UK law); (ii) meet the ownership requirement (i.e. meets either a genuine diversity of ownership condition or a non-close condition); and (iii) meet the restriction requirement. In this regard, the Government has legislated for the three restriction requirements regimes which were previously discussed as part of the consultation process to ensure compliance with the UK non-resident capital gains tax rules. A RIF needs to meet one of the following restriction requirements:

• The non-UK property assets condition (i.e. where the RIF does not directly invest in UK property, or in UK property rich companies);
• The UK property rich condition (i.e. where at least 75 percent of the value of the RIF’s assets is derived from UK property, so the RIF is ‘UK property rich’ for the purposes of the non-resident capital gains rules); or
• The exempt investor condition (i.e. where all investors in the fund are exempt from tax on gains other than by reason of residence (e.g. certain pension funds).   

A new RIF can apply to rely on a 12-month grace period in which it is deemed to have met the above-mentioned conditions and has notified HMRC the steps which will be taken in order to meet the conditions within the grace period.

In line with previous consultations, the Regulations also include procedural requirements for remaining a RIF, the tax consequences that follow a RIF meeting or ceasing to meet eligibility conditions, the annual information that needs to be provided to investors and accounts that must be kept in relation to a RIF, and requiring information and notices to be submitted annually to HMRC. The Regulations also propose the treatment of breaches of the regime including potential time limits to remedy certain breaches satisfactorily.

Stamp Duty Land Tax seeding relief will be available to the RIF in respect of UK property meeting certain conditions which is consistent with the initial consultation.

The RIF is the first new UK collective investment scheme for a number of years and complements a number of other recent additions to the UK landscape such as the Qualified Asset Holding Company (QAHC) regime which could potentially be implemented within a RIF structure. 

Please contact the authors or your usual KPMG in the UK contact if you would like to know more about the RIF.

For further information please contact:

• Amy Manchia
• Paul Bradbury