IFM05520 - Investors in property authorised investment funds (PAIFs): investors within the charge to income tax - PAIF distributions (interest)

From 6 April 2017 PAIFs are no longer required to deduct income tax on payments of interest. Interest distributions received by investors are taxable as interest in the normal way.

Prior to 5 April 2017, under regulation 69Z19 of SI 2006/964 income tax was normally deducted at source by the fund at the basic rate and the investor was treated as receiving yearly interest with income tax deducted at the basic rate. The PAIF was responsible for deducting tax at the basic rate and for paying the tax deducted to HMRC.

For basic rate taxpayers, there was no further liability to tax, but higher and additional rate taxpayers had a further liability. Investors with no liability to income tax were able to reclaim the tax deducted, as described under property income distributions at IFM05510.