The UK government is considering introducing new regulations that would make open-ended property funds tax-friendlier and therefore more attractive to investors.
The UK government is considering introducing new regulations that would make open-ended property funds tax-friendlier and therefore more attractive to investors.
Under the draft proposals, open-ended investment companies would be permitted to convert to authorised investment funds and would be exempt from corporation tax, bringing them into line with real estate investment trusts (REITs). The changes are outlined in a consultation paper published on Thursday.
By removing the tax distortion between open-ended funds and REITs, the government hopes to encourage greater investment in authorised property funds. The move is expected to please retail investors in particular, who are currently subject to double taxation if they invest in open-ended funds via pension schemes or ISAs.
Under the proposals, funds would have to meet many of the same conditions as REITs to convert, such as not paying more than 10% of their dividends to a single shareholder. They would also be required to hold more than 60% of their assets in direct property or REIT shares.
