Consultation may offer PAIFs better tax treatment

The UK fund industry has welcomed the government’s intention to consult on stamp duty land tax seeding relief, announced in the 19 March Budget.

The consultation will cover the SDLT treatment of seeding property authorised investment trusts (PAIFs) and the wider SDLT treatment of tax-transparent funds.

At present, the 4% tax is payable when a PAIF is launched by transferring existing property portfolios as seed assets, even when the ownership does not change. This has been a factor impeding the launch of new PAIFs.

“A change would bring us in line with other jurisdictions in Europe and make the UK more attractive for domiciling PAIFs,” said John Cartwright, chief executive of the Association of Real Estate Funds.

The British Property Federation said: “SDLT seeding relief for PAIFs would encourage institutional investors, including life funds and pension companies, to create new, UK-based investment funds.”

The BPF has highlighted to the Treasury that this should result in more property funds being managed in the UK, rather than in competing jurisdictions such as the Channel Islands.

“Our members would prefer to manage UK domiciled funds as it is significantly less costly and time consuming, and these benefits can be passed on to investors,” Cartwright said.

“With auto-enrolment under way and the growth of the defined contribution pensions market, a PAIF is an obvious solution to diversify investors’ portfolios and access property on a tax-exempt basis.”