IFM05300 - Investors in property authorised investment funds (PAIFs): property income distributions: general principles

Property income distributions (PIDs) (regulation 69Z18 SI 2006/964)

In general, distributions from the tax-exempt income of a PAIF are taxable as the income of a UK property business.

PIDs are separate from other property income

A PID is treated as profits of a separate business from any other UK or overseas property business that the investor may have. Investors must treat receipts of property income distributions from different PAIFs as well as from UK real estate investment trusts (UK REITs), whether one or more, as receipts of the same business. This means that losses on other rental business of a shareholder cannot be set off against distributions from PAIFs or from UK REITs.

This treatment of PAIF distributions as deriving from a separate business is extended to the share of the distribution received by a partner in a partnership which is an investor in a PAIF.

This tax treatment continues to apply after the open-ended investment company has left the PAIF regime in respect of distributions made in respect of the period before the fund ceased to be within the regime.

Dividend statements provided to investors by a PAIF (and by a former PAIF) will make clear the amount of the distribution that is treated as a PID and the amount of tax that has been deducted from it on payment. See IFM04430.

Certain PIDs are treated as trade receipts

A PID is not treated as property income where an investor would normally be taxable on distributions as trading receipts. This affects financial traders and members of Lloyd’s. In such cases it remains taxable as a trade receipt.