Reserved Investor Fund consultation

Following the HM Treasury’s Call for input in January 2021 and the subsequent identification of a need for an investment fund type that
– is unauthorized (does not need to register with the Financial Conduct Authority (FCA));
– is a contractual scheme with respect to its tax treatment;
– is restricted to institutional and professional investors; and
– permits investments in all types of asset classes,
the HM Treasury and the HM Revenue & Customs have now launched a joint consultation on such a proposed new fund type which the regulators suggest to be called Reserved Investor Fund (Contractual Scheme) or RIF (CS). Specifically, the regulators seek feedback from stakeholders on the following key issues. Please note that the below outlined summary does not provide a comprehensive list of all issues discussed in the document. For such detailed information, please refer to the original consultation paper.
#### Issues of interest to the government agencies
– the appropriateness of the suggested fund name (different suggestions are highly welcome).
– whether or not the RIF should be restricted in terms of who can invest into the fund or in terms of permissible assets held by the fund. Various options are presented, particularly in view of the fact that non-UK resident investors should not be exempt from taxation in UK;
– whether or not there should be a notification requirement to ensure that the UK government would be able to monitor the population of RIFs while they are not obliged to register with the FCA;
– whether or not the proposed eligibility criteria are adequate to meet the objectives of investors. The proposed eligibility criteria include, among others:
– the fund must be UK based;
– both the operator and depository must have a place of business in the UK;
– the fund must be an Alternative Investment Fund as defined in same named regulation; or
– the fund is a „co-ownership scheme“ and NOT a „partnership scheme“;
– whether or not RIFs would invest in assets other than real estate and – if so – whether or not any gains from such investments should be addressed in a corresponding tax regime;
– whether or not the proposed reporting requirements of the fund are sufficient to enable investors to file their tax returns;
– how to treat capital gains that result from investments in other funds and / or in non-UK fund vehicles;
– whether or not there shall be a different treatment of the fund with respect to stamp duty; and
– the potential design of a non-restricted reserved investor fund.
——————
The consultation closes on June 9, 2023.