Property authorised investment funds (PAIF) (Property AIF) meaning

Tax elected fund (TEF) A ‘tax elected fund’ (TEF) is an authorised investment fund (AIF) that has obtained TEF status by applying successfully to HMRC. Mirroring the PAIF framework (available to certain AIFs that hold property), a dedicated set of tax rules for TEFs aims to shift the incidence of taxation from the fund vehicle to the investor in practice. Consequently, TEF investors are taxed as if they had owned the underlying assets outright themselves. Apart from particular provisions found in the TEF rules, TEFs otherwise remain subject to the tax treatment that generally applies to AIFs in general terms. Brought in during 2009, the TEF regime sought to enhance the tax efficiency of funds investing in a mixed portfolio of assets—this is achieved as the TEF structure allows different categories of income to be streamed to investors in effect. The TEF approach is not appropriate for funds that derive income directly from a property business (UK or overseas), for which the PAIF regime may instead be used where...

The tax regime for property authorised investment funds (PAIFs) The PAIF tax framework applies to UK open-ended investment companies (OEICs) that satisfy specified criteria. In some cases, falling short of these requirements can result in removal from the PAIF regime, while a PAIF may equally opt to depart voluntarily. The outcome of any failure hinges on the precise condition involved and, in certain instances, whether the failure is a repeat occurrence. The PAIF conditions are explained in detail in Practice Note: PAIFs—the conditions. This Practice Note covers: what follows when one or more PAIF conditions are not met, and the tax consequences of an exit from the PAIF regime For a high-level summary of the overall PAIF framework, see Practice Note: Tax and property funds—overview. For the tax treatment of PAIFs and their investors, alongside associated compliance requirements, see Practice Note: PAIFs—tax treatment of the fund and its investors. The statutory rules for PAIFs are contained in the Authorised Investment Funds...

FORTHCOMING CHANGE relating to the UK funds regime : The outcome of the government’s review of the UK funds regime (see News Analyses: Review of the UK funds regime—an analysis, and HM Treasury’s review of the UK funds regime—a call for input) contains proposals to keep the tax treatment of the new long-term asset fund structure (LTAF) under ongoing review. This Practice Note considers the genuine diversity of ownership (GDO) requirement, which: certain authorised investment funds must meet to obtain favourable tax treatment under the tax regime applicable to authorised investment funds; and all authorised investment funds must meet to benefit from the certainty provided by the ‘investment transactions list’ (sometimes called the ‘white list’); and relevant authorised investment funds must meet to enter the property AIF (PAIF) or tax elected fund (TEF) tax regimes The expression ‘authorised investment fund’ (AIF) is used in tax legislation to refer collectively to two fund types: the authorised unit trust (AUT) and the...