IFM04150 - Property authorised investment funds (PAIFs): introduction and conditions of membership for the regime: intermediate holding vehicles
The definition of Property Rental Business also includes the relevant business of an intermediate holding vehicle. The ‘relevant business’ of an intermediate holding vehicle is all that part of the overseas property business of the vehicle which would be within the Property Rental Business if it were directly carried on by the PAIF.
The conditions that must be fulfilled by an intermediate holding vehicle can be found at regulation 69I of SI 2006/964. The purpose of this regulation is to enable investment in foreign property, in jurisdictions where local restrictions prevent the PAIF from holding property directly.
An ‘intermediate holding vehicle’ must:
- Be a company, trust or partnership which is not a collective investment scheme,
- Be wholly owned either by the PAIF parent or by another intermediate holding vehicle, except in as far as local legislation relating to the vehicle requires a proportion of local ownership,
- Have its accounts consolidated with those of the PAIF,
- Ensure that all its property rental income (or the full proportion of that income representing the interest of the PAIF) must be reflected in the distribution accounts of the PAIF at the same time as the income is reflected in its accounts, and
- Have as its sole function to enable the holding by the PAIF of real property located outside of the UK.
‘Enabling the holding of property’ will include activities ancillary to the property rental business providing that these activities are carried on purely for the purpose of enabling the property rental business to exist, continue or prosper. If any of these activities would fall outside a “property business” in the United Kingdom (see section 205 of the Corporation Tax Act 2009) then the income from those activities will not be included in the property rental business, but will be part of the non tax-exempt (residual) income of the PAIF (see IFM04330).