Non-resident capital gains tax rules – new regulations regarding Funds

Non-resident capital gains tax rules – new regulations

New regulations amending the NRCGT rules for collective investment vehicles expected to come into force on 10 April 2020.


Also on

New regulations amending the Non-resident capital gains tax (NRCGT) rules for collective investment vehicles have been published and are expected to come into force on 10 April 2020. The new regulations are likely to increase the number of Funds now within the scope of the Non-resident capital gains tax rules. However, the changes should also allow more funds to meet the conditions for an exemption election. We recommend that all collective investment vehicle (CIV) structures are reassessed in light of the recent changes to the NRCGT rules. The regulations also extend the deadline for transparency elections from 5 April 2020 to 30 September 2020 and expand the effect of exemption elections made before 1 October 2020 to cover disposals since 6 April 2019.

The definition of a CIV has been amended and it now includes a principal company of a group UK real estate investment trust (REIT). From 10 April 2020, non-resident investors with a less than 25 percent interest in a group UK REIT will now be within the charge to UK tax.

Other key developments are as follows:

Property-richness test for collective investment vehicles (CIVs)
CIVs that were previously considered to be non-UK property rich on the basis of the trading exemption and/ or linked disposals exemption will be considered UK-property rich from 10 April 2020 and should assess the possibility of making an election under the CIV rules. Investors in such CIVs must also reassess the impact of these rules because from 10 April 2020 they will be within the charge to tax on gains on relevant disposals. This will be relevant for CIVs owning an international portfolio of properties where UK properties are less than 75 percent of the total value and for CIVs owning UK properties held for the purposes of a trade e.g. hotels. Investors should still be able to rely on the trading exemption and/or linked disposals exemption if their interest is not held via a CIV.

Transparency election
All transparency elections submitted to HMRC on or after 10 April 2020 must include investors’ details. An annual partnership return should be submitted regardless of any underlying disposals and should show the amount in which each partner is chargeable to tax on chargeable gains.

Exemption election

Non-close condition, General Diversity of Ownership (GDO) condition and UK tax condition

The non-close condition has been amended to provide helpful clarifications to cater for structures where the manager of a CIV or a general partner of a partnership controls the voting power in a company and where CIVs controlled by qualifying investors own their interest in CIVs via deemed companies.

The GDO condition has been amended (to ensure CIVs are not disadvantaged despite being widely held/ marketed) in relation to certain pre-existing funds, closed-ended and limited-life funds and to cater for certain situations where the CIV is owned by feeder funds.

Further, where the UK tax condition is potentially applicable but cannot be met purely because a holding company owned by qualifying investors is resident in a territory that would make the CIV fail the UK tax condition, then it would be treated for these purposes to have met the UK tax condition.

Exemption for disposals by corporate feeders owned by qualifying institutional investors
The original rules provide for an exemption to companies owned by qualifying investors on the disposal of their interest in a fund which has made an exemption election. The regulations now extend this exemption to such companies on the disposal of their interest in a UK REIT, a property authorised investment fund and in a fund which has made a transparency election. The regulations also extend the exemption to parents of such companies. These changes apply retrospectively i.e. from 6 April 2019.

Exemption election under paragraph 12(3) (i.e. by certain tax transparent CIVs in respect of an underlying investee company)
From 10 April 2020, such an election can only be made in respect of investee companies that are directly owned by the CIV. Any existing elections by affected companies that are not directly held, will cease to have effect from 10 April 2020.

For further information please contact :

© 2021 KPMG LLP a UK limited liability partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organisation please visit

Connect with us


Want to do business with KPMG?


loading image Request for proposal

Save, Curate and Share

Save what resonates, curate a library of information, and share content with your network of contacts.

Sign up today