Taxation of Chargeable Gains Act 1992 Schedule 5AAA paragraph 16

Exemption for direct or indirect disposals of UK land by persons in which fund invests

Section 16 provides a partial exemption from chargeable gains tax when a person disposes of UK land (directly or indirectly) and a qualifying fund or company that has elected for transparency treatment holds a significant investment in that person.

• Where a qualifying fund or company ("Q") has made a transparency election and is UK property rich, and another person disposes of UK land while the election is in effect, a proportion of the gain may be exempt from capital gains tax.
• The exemption applies to both direct disposals of UK property and indirect disposals (such as selling shares in a company that derives its value from UK land), provided Q holds at least a 40% investment in the person or company making the disposal immediately before it takes place.
• The exempt portion — known as the "appropriate proportion" — is calculated as the share of the disposal consideration that ends up (directly or indirectly) forming part of Q's assets, relative to the total disposal consideration.
• HMRC has the power to adjust the exempt proportion for any person if the combined exemptions would otherwise result in more than the whole gain being treated as exempt, making such adjustments as are considered just and reasonable.