IFM04530 - AIFs: Property authorised investment funds (PAIFs): breaches of conditions: breach of the corporate ownership condition

See also the information requirements at IFM04570.

Consequences of breaches of the condition (regulation 69Z5 SI 2006/964)

The regulation applies where the PAIF has breached the corporate ownership condition.

In circumstances where the breach is caused by the action of a shareholder in the PAIF and the manager has not taken reasonable steps to prevent the breach (see IFM04170 for details of what HMRC are likely to accept as ‘reasonable steps’) then a charge to corporation tax charge may arise (referred to as a ‘specified breach’) – see IFM04340 for details relating to the calculation of the tax charge.

Notwithstanding such a breach, the PAIF may continue to remain within the PAIF regime except in the following circumstances, where HMRC will issue a termination notice:

• there are three ‘specified breaches’ in a period of ten years beginning with the first day of the accounting period in which the first specified breach occurs (regulation 69Z5(3)); or
• regulation 69Z8 SI 2006/964 applies in respect of multiple breaches of separate conditions (see IFM04560).