Reserved Investor Fund (RIFs) – UK Government pushing the green light on new Real Estate Fund
The Co-ownership Contractual Schemes (Tax) Regulations 2025 were recently laid before Parliament, detailing the tax framework for Reserved Investor Funds (RIFs). These regulations are set to come into force on 19 March 2025, officially enabling the establishment and operation of RIFs under UK law.
What is a RIF and why have they been introduced?
A RIF is a UK-domiciled unauthorised collective investment vehicle, designed for professional and institutional investors, to provide a tax-efficient and flexible fund structure, particularly for investment in UK real estate.
A RIF facilitates secondary trading, which is the exchange of units between investors, without the buyer incurring stamp taxes including stamp duty land tax (SDLT). In 2004 the levying of SDLT on secondary trading in limited partnerships (that hold UK real estate) encouraged investors to move their fund structures outside the UK. Buyers of units in an offshore fund were not liable to stamp taxes including SDLT.
The RIF structure mirrors successful fund models such as Luxembourg’s Reserved Alternative Investment Fund (RAIF), Ireland’s Qualifying Investor Alternative Investment Fund (QIAIF) and Guernsey and Jersey Private Funds
The RIF is aimed at creating a level-playing field between UK and offshore funds, hopefully encouraging more UK-domiciled fund structures to be used for real estate investment.
Who can invest in the RIF?
Institutional investors such as UK and overseas pension schemes, insurance companies, sovereign wealth fund, charities and investment trusts can invest in the RIF. Additionally, professional investors such as banks, asset managers, large corporates, family offices and high net worth individuals can all invest in the RIF.
Who cannot invest in the RIF?
RIFs are not designed for everyday investors (retail investors) as they are aimed at those with significant investment expertise. Non-professional individuals also cannot participate in RIFs, unless they qualify as high net worth or sophisticated investor exemptions.
What are the tax advantages of a RIF
Income Tax
RIFs are transparent for income tax purposes, meaning that income generated by the fund is taxed directly in the hands of investors at their respective marginal tax rates. Tax isn’t paid at the fund level.
Capital Gains Tax (CGT)
RIFs are treated as opaque, meaning they are not subject to CGT on the disposal of its assets. Instead, investors are liable for CGT upon the disposal of their units in the RIF.
Stamp Duty Land Tax (SDLT)
Transfers of units in a RIF are exempt from SDLT. However, the RIF is still liable to SDLT on the acquisition of UK property, unless the RIF qualifies for seeding relief whereby investors can contribute property to the fund without SDLT arising.
Capital Allowances
RIFs benefit from simplified administration of capital allowances, aligning with provisions applicable to other UK fund structures. Capital allowances can be pooled at the fund level, and then flexibly allocated to investors through their share of taxable profits calculation.
How can Moore Kingston Smith help?
Our real estate specialists work with investment funds to ensure compliance with reporting and tax regulations to achieve the desired tax benefits. Here’s how Moore Kingston Smith can assist funds and fund managers.
Capital allowances
Our specialist capital allowances team can assist fund managers in navigating the relevant legalisation and calculate claims to maximise investor value on acquisition and improvement expenditure.
Tax advisory and compliance
Although tax transparent, the Reserved Investor Fund will still have reporting obligations to HMRC and tax calculations to perform for investors, which our expert tax team can advise on and assist with. The team can also perform tax due diligence where required.
VAT advisory and compliance
RIF’s will still have to comply with UK VAT requirements too, which can be a complex area where different asset classes are involved. Our VAT specialists can advise on VAT efficiency and provide compliance services.
Financial reporting
Our accounting teams can provide bookkeeping, management reporting, investor reporting and year end reporting services, so that management teams don’t need to hire in an expensive finance team.
Audit and assurance
Where required, we can perform audit and assurance work on financial information for investors and other stakeholders.
Data privacy and cyber security
No business is immune from data criminals and fund managers will need to ensure investor data is adequately protected. Our data privacy and cyber security team can provide a variety of services to help fund managers manage and navigate this ever evolving risk.
