Conversion details

Columbia Threadneedle Investments has announced the conversion of the Threadneedle UK Property Trust to a Property Authorised Investment Fund (PAIF).  This structural change occurred on 14^th May 2016.  The new fund is called the Threadneedle UK Property Authorised Investment Fund.

There is also a feeder fund called the Threadneedle UK Property Authorised Trust, which is not subject to the PAIF rules.  This fund has been established for those investors who are not eligible to invest in a PAIF, or are unable to do so for operational reasons.

The fund retains its Recommended status on The Adviser Centre.

PAIF tax advantages

A PAIF is a type of tax-efficient property fund which has advantages in terms of tax treatment compared to that of traditional authorised property funds.  At present, property funds that are not in a PAIF structure must pay corporate tax on the rental income they receive at a rate of 20%.  PAIF structures provide a means by which eligible investors can receive income gross of tax.

PAIFs are required to divide their income into three different streams for UK tax purposes, with property rental income and interest income paid gross to eligible investors and therefore not subject to 20% tax within the fund.  Dividends from any property securities held in a PAIF are treated as dividend distributions.  As a reminder, from the 6^th April 2016, the 10% dividend tax credit was abolished.  Instead, a new dividend tax allowance of £5,000 a year was introduced where shareholders receive the first £5,000 of dividend income free from income tax.

Eligible investors include those who are holding the fund in an ISA or a pension and also UK non-tax payers.  Charities and pension funds also benefit from the tax advantages of PAIF structures.

Change to income distribution dates

There is no change to the management philosophy or approach as a result of the conversion.  However there has been a change to the frequency of income distributions.   Where the Threadneedle UK Property Trust made income distributions half-yearly, the Threadneedle UK Property Authorised Investment Fund (PAIF) and the Threadneedle UK Property Authorised Trust (the Feeder fund) will make income distributions quarterly.

As these are newly created funds, they have new identifiers (ISIN / Sedol / MEXID code and Citicode).