The RIF is a new type of UK fund structure and has been available since March 2025.
Legal form
Legally, it takes the form of a contractual co-ownership scheme. It has no separate legal personality, and there is no "entity" or "vehicle" as such: there is instead simply a binding contractual arrangement (called a RIF deed) between the manager, depositary and investors, which serves as the RIF's constitutional document. The RIF's assets are legally held by (or for) the depositary, but are beneficially owned by the investors as co-owners. A RIF can be open- or closed-ended, or a hybrid.
Regulation
A RIF must be a collective investment scheme (CIS) and an alternative investment fund (AIF). It must have a UK alternative investment fund manager and a UK depositary, but is itself an unauthorised fund. There is therefore no FCA authorisation process (as there is for an authorised fund such as a QIS, PAIF or LTAF); but the standard FCA filing and notification requirements under the UK AIFMD regime apply as they do to other AIFs, and must be factored into any launch timelines.1
Tax
The principal innovation with the RIF is its specific UK tax status. The tax regime for RIFs is relatively complex and there are various conditions which must be satisfied, but broadly a RIF is (a) transparent for income purposes and (b) not subject to tax on gains. In practice, this means that:
- income is not taxed at the level of the RIF; instead it is treated as arising directly to investors, in proportion to their rights under the RIF deed, and is taxed at the investor level (according to each investor's tax status); and
- neither the RIF nor its investors are subject to tax on capital gains when the RIF disposes of its assets, meaning that gains can be recycled into new investments. Instead, investors are subject to tax on capital gains if and when they dispose of their holdings in the RIF (which are referred to as their "units").
Further, there is no UK stamp duty or stamp duty reserve tax on transfers of RIF units, nor any stamp duty land tax (SDLT). If the RIF acquires real estate, SDLT is payable by the RIF itself, not its investors. However, management services supplied to RIFs are not specifically exempted from VAT.
Restrictions
To benefit from this specific tax status, a RIF must (in addition to certain other conditions) comply with at least one of the following three restrictions: (a) it must be UK "property rich"2; (b) alternatively, it must have no direct or indirect interests in UK real estate; or (c) all investors must be exempt from UK tax on capital gains. Aside from a RIF intending to comply with either of the first two restrictions, there are no investment restrictions or borrowing limits with which a RIF must comply.
Use cases
The RIF is often described as a UK equivalent of an offshore unit trust (such as a Jersey property unit trust (JPUT)), as it delivers a broadly equivalent tax treatment for investors. Indeed, one of the policy intentions behind the RIF was a desire to provide fund sponsors with a fully onshore UK option for structuring real estate funds (although the RIF can be used for other strategies too).
In this context, a RIF can be seen as a potential alternative to an English or Scottish limited partnership (LP), and may be preferred over an LP if there is a desire to:
- facilitate secondary trading by investors (by virtue of the lack of SDLT on unit transfers) – albeit the same outcome is achieved by an LP that holds real estate indirectly through corporate SPVs (which for financing and other reasons is often the case) or by having investors participate in an LP indirectly via a unit trust feeder; or
- shield capital gains from tax until investors dispose of their units.
Importantly, though, a RIF must be both a CIS and an AIF. As a result, it will only be suitable as a commingled fund structure, and not as an SPV, joint venture or general asset holding structure. This contrasts with both LPs and JPUTs, which can be used for these purposes (often benefiting from exemptions from the CIS and/or AIF regimes), as well as for commingled funds.
In general, we expect the RIF will be an option for sponsors pursuing UK commercial real estate strategies to consider (alongside the traditional LP structure), particularity where there is demand for a fully onshore UK fund structure.
Footnotes
1 Including, for example, the "new fund under management", marketing and any relevant delegation filings.
2 Broadly, more than 75% of its gross asset value must be derived from UK real estate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
