PAIFs—breach of the conditions and exit
Produced in partnership with Martin Shah of Simmons & Simmons LLP based on material originally written by Charles Goddard of Rosetta Tax LLP
PAIFs—breach of the conditions and exit

The following Tax practice note produced in partnership with Martin Shah of Simmons & Simmons LLP based on material originally written by Charles Goddard of Rosetta Tax LLP provides comprehensive and up to date legal information covering:

  • PAIFs—breach of the conditions and exit
  • The conditions
  • Requirement to provide information
  • Breach of property investment business condition
  • Breach of genuine diversity of ownership condition
  • Breach of corporate ownership condition
  • Breach of loan creditor condition
  • Breach of the balance of business conditions
  • Newly qualified PAIFs
  • Existing PAIFs
  • More...

In order for a Property Authorised Investment Fund (PAIF)to operate within the PAIF regime without incurring additional tax charges or other penalties, it must continue to satisfy a number of conditions. Failure to meet the conditions can, in certain situations, lead to expulsion from the regime.

PAIFs can, of course, also elect to leave the regime of their own volition.

This Practice Note examines:

  1. the consequences of failure to meet the regime’s conditions, and

  2. the tax effects of exit from the regime

for both:

  1. the vehicle (ie the PAIF) itself, and

  2. the investors in the fund

The PAIF regime as a whole is covered in summary in Practice Note: PAIF—summary.

Details of the conditions themselves are set out in detail in Practice Note: PAIFs—the conditions.

Other aspects of the regime are covered in Practice Notes:

  1. PAIFs—taxation of the scheme

  2. PAIFs—taxation of the participants, and

  3. PAIFs—compliance and vouchers

In this Practice Note, references to the AIF Regulations are to the Authorised Investment Funds (Tax) Regulations 2006 (SI 2006/964).

The conditions

A number of conditions must be met in order for the PAIF regime to apply to an OEIC:

  1. the property investment business condition

  2. the genuine diversity of ownership condition

  3. the corporate ownership condition

  4. the loan creditor condition

  5. the balance of business conditions, and

  6. the notification condition

More detail on each of these conditions can be found in Practice Note: PAIFs—the conditions.

Although primarily pre-conditions

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