STSM105090 - Collectives: Exemptions: Feeder fund to a Property AIF
A Property AIF (PAIF) is a form of Authorised Investment Fund whose investment portfolio comprises predominantly real property or shares in United Kingdom Real Estate Investment Trusts (UK- REITs) and certain other similar entities. For an AIF to be within the Property AIF regime it must:
- Be an Open-Ended Investment Company (OEIC);
- Have given notice to HM Revenue & Customs (HMRC) to come within the Property AIF regime which is set out in Part 4A of SI 2006/964 (The Authorised Investment Funds (Tax) Regulations 2006); and meet certain conditions (as outlined in Part 4A SI 2006/964).
A surrender (or issue) of units in a specialist unit trust fund (commonly called a feeder fund) that is set-up to invest solely in an associated PAIF is exempt from a SDRT charge under Paragraph 2 of FA1999/SCH19 by virtue of paragraph 10 of SI 2008/3159 (The Authorised Investment Funds (Tax) (Amendment No.3) Regulations 2008) which amends SI 2006/964.
To be exempt from FA1999/SCH 19, however, a feeder fund has to satisfy certain conditions. The conditions are:
- The feeder fund scheme must be dedicated to investment in the shares of a specified and recognised PAIF; and
- The trust deed and prospectus of the scheme must specify that the scheme can only invest in the PAIF; and
- The feeder fund scheme must, within one working day of receiving an investment i.e. cash etc. invest in the PAIF an amount equal to the investment; and
- The feeder fund scheme must, within one working day of actioning a request by a unit holder to surrender a unit in the scheme, surrender its interest held in the PAIF which equates to the value of the unit surrendered.
Moreover, to be eligible for exemption, a feeder fund scheme must not set-off a unit which is surrendered to the fund manager with an issue of a unit upon subscription.
A feeder fund scheme is not eligible for an exemption from a FA99/SCH19 charge if the fund contains investments other than shares in the specific PAIF or cash (the later of which is used solely for day to day management of the fund).
The FA99/SCH19 charge applies only to units and OEIC shares which are surrendered and transferred prior to 30 March 2014. See STSM103005.
See STSM101010 for the meaning of a Collective Investment Scheme.
See STSM101020 for the meaning of a unit trust.
See STSM101050 for the meaning of an OEIC.