UK Treasury Listens To Concerns Over PAIF Tax Proposals

by Robert Lee, Tax-News.com, London

20 July 2007

The UK Treasury has listened to the investment industry's concerns about a level playing field for the taxation of Property Authorised Investment Funds (PAIFs), and its latest proposals are a significant step forward, according to the Investment Management Association (IMA).

Commenting on Wednesday's Discussion Paper on PAIFs from the Treasury, Julie Patterson, Director of Regulation, Operations and Taxation at the IMA, noted that the proposals will enable non-tax paying investors, such as pension funds and charities to invest in PAIFs without suffering any tax.

"We welcome the Government's continued commitment to launching a new tax regime for these funds by April 2008," Patterson stated. "The proposals require existing Property Authorised Unit Trusts to convert to OEICs to take advantage of the new regime and the Treasury's commitment to relieve funds of the Stamp Duty Land Tax they would otherwise incur in converting is welcome."

She continued:

"The proposal that funds should ring-fence and distribute different types of income raises some operational questions, but discussions are ongoing about how to minimise the effects of those changes. Most importantly, the Treasury has proposed a solution to address problems associated with the limitation on corporate investors receiving 10% or more of a fund's distributions, which is of particular concern for large life company investors."

"The Treasury has suggested that large corporate investment could be allowed via an Authorised Unit Trust, leaving corporates able to invest without limit at the appropriate tax rate. We will continue to work closely with the Treasury to ensure that the few remaining questions with the new regime are addressed."

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