IFM17200 - When does a genuine diversity of ownership (GDO) condition apply?
Source: gov.uk (2025-04-17)


A GDO condition applies across a range of tax regimes, including those set out below.

Authorised Investment Funds – regulation 9A of SI 2006/964

This GDO condition applies in determining the tax treatment of certain transactions carried out by authorised investment funds (AIFs) under Part 2B SI 2006/964 (see IFM02260 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm02260)).

It also applies to AIFs that are (or will be applying to be):

Property AIFs (see IFM04000 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm04000)).

Tax Elected Funds (see IFM06000 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm06000)).

Qualified investor schemes (QISs) or long-term asset funds (LTAFs) (see IFM02300 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm02300)).

Offshore Funds – regulation 75 of SI 2009/3001

This GDO condition applies in determining the tax treatment of certain transactions carried out by certain offshore funds that are reporting funds (see regulation 80 SI 2009/3001 and IFM12553 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm12553)).

Where such a reporting offshore fund satisfies the GDO condition throughout an accounting period it will for that period benefit from certainty of treatment with regard to certain transactions and in calculating the amount of reportable income arising to investors (see IFM12500 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm12500) for further details on the calculation of reportable income).

To qualify for this treatment, a reporting offshore fund must also meet the equivalence condition in regulation 74 (SI 2009/3001) (see IFM12555 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm12555)).

Qualifying Asset Holding Companies (QAHC) regime – FA22/Sch2

A GDO condition applies when determining whether a fund which is a collective investment scheme meets the diversity of ownership condition at paragraph 9(2)(a) of the QAHC rules contained in FA22/Sch2. If a fund satisfies this condition, it will meet the definition of a ‘qualifying fund’ (see IFM40240 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm40240)). The diversity of ownership condition at paragraph 9(2)(a) is a modified version of the GDO condition at regulation 75 of SI 2009/3001 (interpreted in accordance with regulation 76).

Non-resident capital gains (NRCG) rules – TCGA92/Sch5AAA

A GDO condition may need to be satisfied by a collective investment vehicle (TCGA92/Sch5AAA/para 1) in order to benefit from certain provisions in TCGA92/Sch5AAA, in particular:

Disapplying the appropriate connection to a CIV TCGA92/Sch5AAA/para7(2)(b) (see CG73997M (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg73997m))

Meeting the qualifying conditions for an exemption election TCGA92/Sch5AAA/para 13(1)(a), 13(1)(ab) and 13(2)(b) (see CG73998V (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg73998v))

Meeting the definition of a qualifying investor TCGA92/Sch5AAA/para46(3)(a) (see CG73996Y (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg73996y))

The GDO conditions in TCGA92/Sch5AAA are a modified version of the GDO condition at regulation 75 of SI 2009/3001 (interpreted in accordance with regulation 76).

Real estate investment trust (REIT) rules

In order to be treated as an institutional investor for the purposes of the REIT rules, certain investors must meet a modified version of the GDO condition at regulation 75 of SI 2009/3001 (interpreted in accordance with regulation 76) (see IFM22016 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22016)).

Co-ownership authorised contractual schemes (CoACS) seeding relief from SDLT

The relief contained in FA03/Sch7A requires the relevant CoACS to satisfy the GDO condition set out in paragraph 15 (see IFM08420 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm08420)). The GDO condition contained in paragraph 15 closely mirrors that in regulations 75 and 76 of SI 2009/3001.

Clearances

An AIF, an offshore fund or a CoACS can apply to HMRC for an advance statutory clearance that the GDO condition at regulation 9A of SI 2006/964, regulations 75 and 76 of SI 2009/3001 or paragraph 15 FA2003/Sch7A is met. See IFM17400 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm17400).

There is no equivalent statutory clearance process for any other tax regime which utilises a GDO condition. Whether or not a particular fund satisfies the relevant GDO condition is a question of fact and is not something which HMRC can confirm under the Non-Statutory Clearance Service (https://www.gov.uk/guidance/non-statutory-clearance-service-guidance). The Non-Statutory Clearance Service remains available for genuine points of uncertainty which are not addressed in this manual.