Corporation tax exemption on a pool of income and gains
A Property Authorised Investment Fund (Property AIF) is an open-ended investment company which is a form of authorised investment fund. Its investment portfolio comprises predominantly one or more of:
real property (commercial and residential)
shares in UK Real Estate Investment Trusts (UK- REITs)
shares in certain foreign entities equivalent to UK-REITs
A Property AIF is exempt from corporation tax on a pool of income and gains arising from investment in the type of property assets listed above.
The investors in a Property AIF will then receive the income arising to the tax-exempt pool as a Property Income Distribution (PID) which is treated for the investor’s tax in the same way as the profits of a UK property business.
Investors may also receive two other types of income from a Property AIF:
PAIF distribution (interest) – treated by the investor as a payment of interest
PAIF distribution (dividends) – treated by the investor as a UK dividend (and which carries the same tax credit as other dividends)
All individual investors will receive a PID and a PAIF distribution (interest) after deduction of basic rate income tax. Some other categories of investor are entitled to receive payment without deduction of tax.