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Property Authorised Investment Funds (PAIFs)

Eversheds Sutherland acted for the ACDs of the first institutional and the first retail PAIFs to launch, as well as for the subsequent ones created by the conversion of existing unauthorised or authorised property unit trusts and recently a Luxembourg fund. We also acted for the first PAIF feeder fund investing into an authorised contractual scheme (ACS) master fund. Our clients include the sponsors and hosts of specialist PAIFs investing in residential property and student accommodation.

About Property Authorised Investment Funds (PAIFs)

PAIFs are a UK tax-efficient, regulated property fund structure, enabling the retail and/or institutional markets to access professionally-managed property portfolios.

About Property Authorised Investment Funds - read more

PAIFs are open-ended investment companies (OEICs), or OEIC sub-funds, that meet various conditions set out in the Authorised Investment Funds (Tax) Regulations 2006 and that have elected for PAIF tax status. They can be formed under the FCA regulations either as non-UCITS retail schemes (NURSs) or as qualified investor schemes (QISs). To qualify for PAIF status, an OEIC’s investment objective and activity must be investing in direct property and/or UK REITs and/or their foreign equivalents. This is tested yearly through a balance of business test that requires 60% of a PAIF’s net accounting income (40% in the first year) to be generated from these assets which must also constitute at least 60% of its balance sheet at the end of each of its accounting periods (40% for the first one). PAIFs must satisfy a “general diversity of ownership” condition that requires them to be actively marketed to appropriate investors for their regulatory category. Importantly, there is a tax-driven requirement for direct investment by any single corporate investor in a PAIF to be restricted to under 10% of its value. PAIFs generally facilitate substantial corporate investments by having a dedicated feeder fund alongside the PAIF providing indirect access to the same property pool.

PAIFs must not be party to loans giving more than a normal commercial return or which are either profits and/or assets-linked. Permissible debt levels are laid down by the FCA and depend on the PAIF’s regulatory status. In the case of QISs, there is a further profit/financing costs restriction capping the amount of tax-deductible interest the PAIF can pay at 1.25:1.


A PAIF’s net income must be either distributed to, or accumulated for, its shareholders each year. These allocations must be treated as divided into up to three parts (essentially property income, interest and dividends) for UK tax purposes in the hands of UK tax-resident investors, depending on the make-up of the relevant PAIF’s income. The tax treatment of PAIFs and the tax-streaming results in UK investors being taxable or exempt on a PAIF’s income in broadly the same way as if they had invested in the underlying assets directly. This contrasts with the tax leakage suffered by UK tax-exempt investors who invest in authorised property unit trusts or OEICs that do not have PAIF status and which pay 20% corporation tax on their net rental income.

Distributions - read more

The other UK tax characteristics of PAIFs are the same as for other OEICs. Their capital gains are exempt from tax, with investors generally being liable to pay tax on any chargeable gains they realise on the disposal of their PAIF shares. Investors can invest (and disinvest) cash in a PAIF without a stamp tax liability arising and their management, including their investment management, is exempt from VAT.

Shares in PAIFs can also be a tax-efficient way for many non-UK investors to invest in UK property using the UK’s double taxation agreements.

The Government has recently introduced a seeding relief so prospective investors can subscribe for the initial shares in new PAIFs by transferring existing UK property portfolios into them without an SDLT liability. The new SDLT regime for ACSs introduced at the same time has resulted in PAIFs being used as a feeder fund into an ACS which holds the property portfolio.

For further information, including our firm’s briefings and publications, please follow the links to the right of this page or contact one of our experienced advisers.

How we can help with PAIFs

Eversheds Sutherland has been instructed on the design and launch of over fifteen PAIFs and is actively working on more. It acted as specialist adviser on another PAIF and converted a further one from QIS to NURS status. We have also acted for the Depositary for several PAIFs.

  • Planning and structuring - We can assist with the preparatory steps your business needs to undertake before the launch of a PAIF, including consideration of the structuring options available,  fund structuring and implementation (including the interaction of the master/feeder arrangement).  As part of this we provide detailed advice on the tax  and property acquisition aspects.
  • Scheme documents and authorisation – We can prepare and negotiate all relevant scheme documents, including the instrument of incorporation and ancillary contracts, and manage the FCA authorisation process.
  • Tax advice and planning – Our funds tax team can advise on every aspect of the PAIF regime, as well as on the implications of the master/feeder arrangements.  We work closely with our real estate tax team to provide practical solutions across all the asset types on both direct and indirect real estate transactions.
  • Ongoing regulatory and compliance management – Our team can assist with future changes to the Scheme and any regulatory or investor notifications required.
  • Depositary advice – Our dedicated depositaries team can advise depositaries on relevant issues and can negotiate and prepare depositary agreements and ancillary documentation.
  • Derivatives advice – Our derivatives team advises authorised funds on their derivative strategies, collateral, security arrangements, agreements and on compliance with their regulatory obligations.

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