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Ignis and M&G to convert property funds into tax efficient Paifs

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Ignis and M&G to convert property funds into tax efficient Paifs

Ignis Asset Management is to convert its £940 million UK Property fund into a property authorised investment fund (Paif) at the start of next year.

Ignis is one of several firms looking to convert its property funds to Paifs, to provide a more tax-efficient structure for investors.

However, the process has been protracted due to issues with how platforms manage the income streams of Paifs.

Steven Beveridge, chief operating officer of real estate at Ignis, said: ‘Earlier this year we established a project tasked with converting the Ignis UK Property fund to a Paif structure in 2013. 

‘While most of the operational and tax issues have now been addressed, there are still some points of detail to be resolved. That said, we are confident we will move in line with the majority of our immediate peer group and convert next year.’

The default tax regime in the UK is that non-Paif funds are subject to corporation tax at 20% on taxable income, but Paifs are exempt from this as distributions are ‘streamed’ between rental income, interest and dividends. This means investors can receive gross income via Paifs.

M&G is also currently looking to convert its £2 billion Property Portfolio into a Paif.

The firm is aiming to launch a new M&G Paif Oeic fund and will then merge the Property Portfolio fund into this, subject to shareholder approval.

The group said there will also be a linked feeder fund for investors who are not able to directly invest in the new Paif.

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