Why are the Schedule 1A trading land exceptions switched off under section 33A?

The trading land exceptions in paragraphs 5 and 6 of Schedule 1A would otherwise allow disposals involving UK land used for trading purposes to fall outside the property rich rules. Section 33A switches these off where a transparency election exists, so that disposals of units in elected vehicles remain within the UK property rich regime regardless of the land's use.

How does section 33A apply to qualifying companies within a fund structure?

Where a transparency election has been made for a qualifying company within a fund, section 33A disapplies the trading land exceptions only to the extent the disposal of fund units represents an interest in that qualifying company. The disapplication is proportionate rather than applying to the entire fund unit disposal.

Can an investor in a transparency-elected fund use the paragraph 5 exception for UK trading land?

No. Once a transparency election has been made for the fund, paragraph 33A prevents the investor from relying on the Schedule 1A paragraph 5 trading land exception when disposing of units. The disposal remains within the UK property rich rules and any resulting gain may be subject to United Kingdom capital gains tax.

Taxation of Chargeable Gains Act 1992 section 33A

Q: What does section 33A of the Taxation of Chargeable Gains Act 1992 do?

Section 33A disapplies the trading land exceptions found in Schedule 1A paragraphs 5 and 6 for disposals of units in collective investment vehicles or funds where a transparency election has been made. This ensures those disposals remain within the UK property rich rules and cannot use trading land exceptions to escape the transparency regime.

Disapplication of paragraphs 5 and 6 of Schedule 1A

Section 33A removes certain trading land exceptions from applying to disposals of units in collective investment vehicles or funds where a transparency election has been made.

Where a transparency election has been made for a collective investment vehicle, the normal exceptions for UK land used in a trade do not apply when units in that vehicle are disposed of.
Where a transparency election has been made for a qualifying company within a fund, those same trading land exceptions do not apply to disposals of units in the relevant fund, to the extent the disposal represents an interest in that qualifying company.
The exceptions being switched off are those in Schedule 1A paragraphs 5 and 6, which would otherwise exclude certain interests in UK trading land from being treated as UK property rich.
The effect is to ensure that disposals of units in elected vehicles or funds remain within the UK property rich rules, preventing the trading land exceptions from being used to sidestep the transparency regime.

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