PAIFs—taxation of the scheme
Produced in partnership with Martin Shah of Simmons & Simmons and Charles Goddard of Rosetta Tax

The following Tax practice note produced in partnership with Martin Shah of Simmons & Simmons and Charles Goddard of Rosetta Tax provides comprehensive and up to date legal information covering:

  • PAIFs—taxation of the scheme
  • Entry into the regime
  • The ring-fence
  • Tax-exempt business
  • Residual business
  • Rules imposing a tax charge
  • Excess financing costs
  • Cancellation of tax advantage
  • Distribution to holder of excessive rights
  • Value Added Tax

PAIFs—taxation of the scheme

The tax regime for Property Authorised Investment Funds (PAIFs) is designed to create an open-ended collective investment vehicle for property which allows investors:

  1. to be taxed in the same way as if they invested in the property directly, and

  2. to benefit from:

    1. the professional management of the property held by the fund, and

    2. the collective investment power of the other investors in the fund

According to HMRC:

‘the regime exempts property income and gains within the PAIF from corporation tax, similar to the way the UK REITs regime exempts property income and gains from corporation tax for companies that are not collectives.’

This Practice Note considers the tax treatment of an OEIC which is subject to the PAIF regime, through meeting the conditions and electing into the regime by notice.

The detailed requirements of the conditions and the notice procedures are covered in Practice Note: PAIFs—the conditions.

General details of the tax treatment of OEICs within the PAIF regime are covered in Practice Note: PAIFs—summary.

Other aspects of the regime are examined in Practice Notes:

  1. PAIFs—taxation of the participants

  2. PAIFs—breach of the conditions and exit, and

  3. PAIFs—compliance and vouchers

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 Funds (Tax) Regulations 2006 (SI 2006/964)

Entry into the

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