PAIFs—taxation of the participants
Produced in partnership with Martin Shah of Simmons & Simmons LLP based on material originally written by Charles Goddard of Rosetta Tax LLP
PAIFs—taxation of the participants

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—taxation of the participants
  • Attribution of distributions
  • Property income distributions
  • Corporation tax payers
  • Income tax payers
  • Non-residents
  • PAIF distributions (interest)
  • Corporation tax payers
  • Income tax payers
  • Non-residents
  • More...

The intention of the tax regime for property authorised investment funds (PAIFs) is to tax investors in a similar way to those that invest directly in the underlying assets.

HMRC state that:

‘investors [in a PAIF] will pay approximately the same level of tax [on their distributions from a PAIF] as if they had invested directly in the underlying assets’.

This is achieved by the fund separating out the different types of its revenue streams into, and making distributions to investors separately in respect of, three pools of income:

  1. property income (including property income from UK Real Estate Investment Trusts (REITs) and foreign equivalents)

  2. other taxable income

  3. UK dividend income

This Practice Note examines the attribution of distributions made by a PAIF into the three pools and the taxation treatment of the investors on those distributions. It also considers other tax consequences for participants in the PAIF.

For more analysis on how the PAIF must separate its revenue streams, and the tax treatment of the PAIF itself, see Practice Note: PAIFs—taxation of the scheme.

Other tax aspects of the PAIFs regime are dealt with in:

  1. PAIFs—summary

  2. PAIFs—the conditions

  3. PAIFs—compliance and vouchers, and

  4. PAIFs—breach of the conditions and exit

In this Practice Note:

  1. references to CGT are to both capital gains tax and to corporation tax on chargeable gains, and

  2. references to the AIF Regulations are to the Authorised Investment

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