The reserved investor fund (RIF), a new tax-transparent onshore vehicle, is expected to be available to UK-based real estate fund managers later this year, following a consultation on draft tax regulations that ended today.

In March, the UK government confirmed it planned to move ahead with legislation to create the RIF, a new investment structure that could enable real estate fund managers to avoid going offshore.

A number of industry organisations, including the Association of Real Estate Funds (AREF), the British Property Federation (BPF), the European Association for Investors in Non-Listed Real Estate (INREV) and the Investment Property Forum (IPF), have responded to the consultation, voicing support for initiative.

The RIF is being billed as an onshore vehicle that could help encourage domestic and international investment in essential UK projects, potentially supporting the UK’s levelling-up to net-zero objectives.

In its response to the consultation, AREF said: “We believe that the RIF will strengthen the UK’s fund offering and enhance its competitiveness as a global leader in the asset management sector… It is expected that fund management houses will use the RIF to attract professional and other investors that dovetail with the UK government’s goals to level up the nation.”

Richards, Paul

Paul Richards: “We expect the RIF to give our members and their investors, UK and overseas, quick and simple access to projects that can help the UK economy grow”

Paul Richards, CEO at AREF, said: “We represent funds with £50bn in UK property investments alone. We expect the RIF to give our members and their investors, UK and overseas, quick and simple access to projects that can help the UK economy grow, house its people more effectively and make for a more sustainable way of living and working.”

Lonneke Löwik, CEO at INREV, said: “We’re encouraged by the effort that HMT/HMRC put into the draft regulations and, going forward, hope solutions will be found for the key tax-related concerns. With a few adjustments, we envisage the RIF quickly becoming a UK domiciled fund vehicle that the non-listed real estate investment industry will find very attractive.”

Sue Forster, CEO of the IPF, said the organisation had been “a longstanding supporter of this initiative to address a gap in the fund vehicles available for investment in UK direct property”. She said: “We hope that this will facilitate investment at a time when unlocking capital for urban regeneration, housing and decarbonisation of our built environment is at a critical point.”

Rachel Kelly, assistant director at the BPF, said: “Removing barriers to real estate investment and ensuring that the UK has appropriate fund offerings for investors’ needs will be helpful in bolstering the UK’s funds industry and important in addressing some of the biggest challenges of our time – including our net-zero carbon targets, the regeneration of our high streets and the development of more high quality homes.”

Lonneke Löwik who stepped down as INREV CEO Aug 2024

Lonneke Löwik: “We envisage the RIF quickly becoming a UK domiciled fund vehicle that the non-listed real estate investment industry will find very attractive”

The BPF outlined points in its consultation response that need to be addressed to ensure fund managers opt for the onshore RIF over offshore vehicles as such as Jersey unit trusts and Luxembourg FCPs.

Kelly added: “In order for the new RIF to be attractive to the widest pool of investors, the government should ensure that the RIF is competitive with overseas equivalent fund vehicles. The UK must offer a truly competitive and viable onshore option.”

There is hope that the RIF will be ready for real estate fund managers before the end of the summer and ahead of the next general election which needs to be held by 28 January 2025. 

Elizabeth Bradley, global head of tax at law firm BCLP, said: “It is hoped that the regulations are finalised during this Parliament, so that the momentum we currently have with Government to ‘get the RIF done’ is capitalised upon and we reach the finish line.”

According to Melville Rodrigues, head of real assets advisory at Apex Group and a member of the AREF public policy committee, the RIF legislation was “moving quickly through the latter stages”.

Rodrigues, the architect and leading proponent of the RIF, said: “With the RIF legislation being implemented, my passion is for the RIF to attract UK and international institutional capital – and, in the process ease, the burden on government finances – for regeneration of our town centres, more social and affordable housing and accelerating net-zero goals. I’m looking forward to UK fund managers later this year launching RIFs.”

Rodrigues initially proposed the idea to the UK Treasury, HRMC and Financial Conduct Authority. He said he sacrificed his legal career to undertake a campaign to plug the gap in the UK funds offering with the RIF.

Melville Rodrigues

Melville Rodrigues: “My passion is for the RIF to attract UK and international institutional capital”

“It has been wonderful for me to lead the industry initiative, working over several years with government and regulatory officials and the real estate industry. It’s a privilege to have developed a rapport with officials and to have attracted such goodwill, expertise and enthusiasm within industry. The draft RIF tax regulations reflect a pragmatic and robust way forward for government, the regulator and industry.” 

Mark Eade, partner at Blick Rothenberg, said: “I have been involved with the development of the RIF since near the inception, and have witnessed Melville taking a forward thinking role, leading the experts group, together with working to get the most positive engagement with HM Treasury and HMRC I have seen on any similar consultation process to date.

“The current position is very positive for the funds sector, both in terms of being able to offer competitive structures previously unavailable in the UK, whilst also supporting the wider fund sector. I wait with a lot of interest to see how the first cohort of managers will use the new RIF regime and to see successes going forward.”

The RIF consultation coincides with changes to the UK’s real estate investment trusts (REITs). Both the RIF and an unlisted version of a UK REIT were introduced as part of the UK government’s funds regime review, along with long-term asset funds.

“We welcome the introduction of the RIF after months of consultation with industry on the new fund vehicle,” Bradley said. “Some investors are keen to have onshore fund vehicles. We have found that with the now stronger UK REIT regime and hope that the RIF will be an additional option that investors will consider where their circumstances align with the sweet spots of RIF usage.”

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