Melville is the key architect and lead advocate of the UK Reserved Investor Fund (RIF) proposal. He is recognised as the progenitor of the RIF:

Melville has been instrumental in designing of the RIF:

• unauthorised co-ownership AIF
• closed-ended or a hybrid
• limited to institutional investors & (£1m min. commitment) high net worth investors
• effectively tax transparent & tradable units i.e. transfers not inhibited by transaction tax
• unlisted & operates within the UK AIFMD regime with a UK AIFM & UK depositary
• plugs a gap in the UK funds regime, particularly for real estate fund managers  

RIF key attractions:

• strengthens the UK's fund offering and improves competitiveness  
• lowers the barriers for SME asset managers to launch new products
• speed to market and low-cost, in terms of launch and operation
• increases the number of closed-ended or hybrid investment vehicles in the UK
• promotes investment in longer-term, less liquid assets
  

• will assist in getting growth going in the UK economy as well as creating jobs and  opportunities
  

• addresses investors' preference for an onshore fund structure that is FCA regulated
• a "quick win" legislative solution

The RIF will facilitate fund management houses support the UK government's goals to  accelerate the infrastructure and green industrial revolutions including as a structure for public–private partnerships. 

UK government and regulator officials have constructively engaged with this proposal. There is widespread industry support for the RIF initiative, including from institutional investors as well as large and SME fund managers.

The 6 March Spring 2024 Budget saw a welcome announcement from the UK government on the RIF. The government confirmed it is proceeding with tax rules to introduce the RIF. It has since legislated the Finance (No.2) Act 2024 Section 20 and has consulted on draft tax regulations for the RIF: the consultation closed on 14 May 2024.See this link to the AREFand INREV responses to the consultation: https://www.aref.org.uk/resource/professional-investor-fund.html

and

https://www.inrev.org/uk-funds.

Melville was involved in preparing these and other industry responses.

On 21 May 2024 House of Commons Public Bill Committee debated Finance (No. 2) Bill Clause 20 relating to the RIF, and accordingly ordered Clause 20 to stand part of the Bill.

Melville is particularly grateful for, and welcomes, these statements in the debate:

The then Exchequer Secretary to the Treasury (Gareth Davies MP):

“It is a great pleasure, as always, to see you in the Chair, Mrs Latham. Clause 20 begins the process of introducing legislation for a new type of investment fund—the reserved investor fund, which I will refer to from now on as the RIF. At Budget 2020, the Government announced a review of the UK’s funds regime, covering tax and relevant areas of regulation. The review had an overarching objective to make the UK a more attractive location to set up, manage and administer funds, as well as ensuring that UK investors can access a wide enough range of investment vehicles to suit their needs. In the years since, the Government have made a number of successful reforms. In order to build on these successes, the Government announced at spring Budget 2024 that we would be proceeding with the RIF.

The RIF will fill a gap in the UK’s existing fund offering by creating an onshore alternative to existing non-UK fund vehicles that are commonly used to hold UK real estate. Clause 20 provides a definition of the RIF and provides a power for the Treasury to make detailed tax rules through secondary legislation, consistent with the approach taken when introducing tax rules for other investment funds. A later statutory instrument will set out detailed tax rules for the RIF. The regulations will set out supplementary qualifying conditions for a RIF, entry and exit provisions, and rules that deal with breaches of one or more qualifying conditions.

The UK has a world-leading asset management sector. The RIF will play an important role in supporting that leadership by making the UK a more competitive destination for our fund management industry. Indeed, stakeholders from the financial services industry have already shown considerable support for the RIF. I therefore commend the clause to the Committee”.

The then Shadow Exchequer Secretary to the Treasury (Tulip Siddiq MP):

“It is a pleasure to serve on this Committee under your chairmanship, Mrs Latham. I am pleased to respond to clauses 20 to 24 on behalf of the Opposition. Clause 20, as the Minister set out, introduces the necessary powers to set the scope and design of the tax regime and rules for the RIF. Labour welcomes the introduction of the RIF, as it will add to the investment products available here in the UK, particularly for the UK commercial real estate sector.”

Following the 4 July UK general election, the new Parliament is expected to first meet on 9 July and the State Opening of Parliament to take place on 17 July. In view of the cross-party support for the RIF, Melville hopes that soon into the new Parliament the Treasury will exercise its power to make detailed tax rules for the RIF through secondary legislation, so (when the detailed tax rules take effect) managers will be entitled to launch RIFs.

RIF Further Updates:

30 October 2024 Autumn Budget 2024 paragraph 5.117: 

Reserved Investor Fund and related provisions – The government is proceeding with the introduction of the Reserved Investor Fund (Contractual Scheme) – a new type of UK-based investment fund. Related provisions will also make minor changes to the tax rules in respect of Co-ownership Authorised Contractual Schemes. Secondary legislation will be brought forward before the end of the tax year 2024-25.

https://assets.publishing.service.gov.uk/media/6722120210b0d582ee8c48c0/Autumn_Budget_2024__print_.pdf

24 May 2024 Royal Assent of Finance (No.2) Act 2024 with Section 20 containing provisions for the RIF.

https://www.legislation.gov.uk/ukpga/2024/12/section/20

21 May 2024 House of Commons Public Bill Committee ordered Finance (No.2) Bill 2024 Clause 20 to stand part of the Bill.

2 April 2024 The government's draft tax regulations for the RIF.

https://www.gov.uk/government/consultations/draft-regulations-the-co-ownership-contractual-schemes-tax-regulations-2024

13 March 2024 Finance (No.2) Bill 2024 Clause 20 refers to tax legislation for the RIF.

https://publications.parliament.uk/pa/bills/cbill/58-04/0179/230179.pdf

6 March 2024 the government is proceeding with tax rules to introduce the RIF.

https://www.gov.uk/government/consultations/reserved-investor-fund-consultation

30 November 2023 the Financial Conduct Authority confirmed in its Regulatory Initiatives Grid page 44 that "The Government is progressing work on proposals on the establishment of an unauthorised contractual scheme for professional investors."

Regulatory Initiatives Grid

29 June 2023 Royal Assent of the Financial Services and Markets Act 2023, with Section 64 establishing RIFs (referred to as unauthorised co-ownership AIFs) in primary legislation:

https://www.legislation.gov.uk/ukpga/2023/29/section/64/enacted

See also paragraphs 475-482 and 1317-1324 inclusive explanatory notes 

Melville is very grateful to:

- AIMA, AREF, BPF, The Investment Association, INREV, IPF and other industry organisations;

- fund managers, institutional investors, tax advisers, law firms and other professionals

for supporting the RIF.

He appreciates the kind assistance from research, tax, regulatory specialists, senior counsel (John Virgo) and other contacts in developing the design of the RIF.