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Investments in funds are often made by institutional investors (such as pension funds) through feeder vehicles, such as wholly owned holding companies. Such holding companies would, in the absence of special provisions, be potentially subject to tax under the NRCGT rules on gains on disposals of interests in UK property rich entities in which they hold an investment, even though the institutional investor would be exempt if they held the interests directly. For an overview of the NRCGT rules generally see C2.1139 and for an overview of the rules for collective investment vehicles (CIVs) see C2.1160.

An exemption is therefore available to a company which is wholly (or almost wholly) owned by one or more specific type of investors, as listed below, for gains arising on the disposal of units in a prescribed type of fund. In effect, this allows the exemption, immunity or non-taxable status of the investor to be passed down to the company.

The exemption applies to disposals by the company of units in any of the following