Property

Question 1

What alternatives are there to investing in direct property?

Answer 1

• Shares in listed property companies
• Property UTs/ITs
• Offshore property companies
• REITs
• PAIFs

Question 2

What is the tax treatment of a PAIF?

Answer 2

• Rental & property-related income tax-exempt within the fund
• Other taxable income charged corp tax @ 20%
• Property income paid net of 20% tax to investors (unless in ISA or Pn)
• Interest & dividends paid gross

Question 3

What conditions are required for an OEIC to qualify as a PAIF?

Answer 3

• ≥60% of net income must be from property
• ≥60% of total assets must be from property
• <10% of of the fund’s NAV can be held by a single investor

Question 4

What conditions must be met to qualify as a REIT?

Answer 4

• ≥ 75% gross profit from property letting
• ≥ 75% of assets in property letting
• Interest on borrowings must be at least 125% covered by rental profits
• ≥ 90% of profits from property letting must be distributed within 12 months

Question 5

What is the tax treatment of a REIT?

Answer 5

Internal
- Ring-fenced = exempt from corp tax
- Non ring-fenced = corp tax on profits & gains

Investor
- Property income distribution - paid net of BRT (can reclaim or pay further as appropriate)
- Dividends taxed as usual
- CGT liable on realised gains