Tax Guidelines for Property Fund - Partnerships and Unit Trusts
Guidelines on Taxation for Property Fund no.3
The following statements are by way of a general guide to potential investors only and
do not constitute legal or tax advice. They relate to current tax law and practice in
the United Kingdom and are subject to change.
All prospective investors should seek independent advice.
Taxation of the Partnership (Private Investors)
- [ Taxation of the Unit Trust (SIPP / SSAS pension investors) Below. ]
The Partnership should be treated as fiscally transparent. Consequently, the Partnership will have no tax liabilities of its own as distinct from the Investors.
Income
Each Investor will pay tax on their share (as determined by the Partnership Agreement) of the Partnership’s income, which will be treated as arising directly to them.
It is unlikely that any significant capital allowances will be available in the buildings that the Partnership will purchase to mitigate this tax liability. However, as described under the “Proposal” (page 1 - property fund prospectus - pdf format - Click here to view), Consortium expects (on current rates of taxation) to distribute to Investors cash to contribute towards their estimated income tax liabilities.
Capital Transactions
Investors may also be liable for capital gains tax on the disposal of any underlying property of the Partnership.
Any such tax will be assessed and charged on the Investors individually according to their share in the surplus arising on the disposal.
A transfer by an Investor of their interest in the Partnership may give rise to a disposal for the purposes of tax on chargeable gains. A chargeable gain is calculated by deducting from the proceeds of sale the acquisition cost of a property and certain incidental costs of acquisition and disposal.
For UK individuals, the gain is reduced by Taper Relief (which reduces the gain chargeable to tax by a percentage which increases the longer the property has been held, up to 10 years). For UK companies, their allowable expenditure is increased to reflect the movement in the Retail Prices Index in the period between the incurring of the expenditure and the time of disposal.
Investor Tax Responsibilities
Each Investor will be responsible for any UK tax on their share of the income and gains arising in the Partnership. Each Investor will be responsible for submitting Self Assessment tax returns, taking into account their interest in the Partnership.
The operator of the Partnership will provide each Investor with an annual statement, within 100 business days of the end of the Financial Year stating the relevant information on the Partnership’s income and capital gains and the available Capital Allowances (if any).
VAT
The Partnership will incur professional fees and other costs that will be subject to VAT.
The Partnership will bear the cost of such VAT and will aim to recover it where possible.
Stamp Duty Land Tax
SDLT will be payable on the purchase price of the Property by the Partnership and also on a transfer of a Partnership interest by an Investor.
Taxation of the Unit Trust (SIPP / SSAS pension investors)
Income
Income arising in the Trust, after deducting allowable property and financing costs and Capital Allowances, will be subject to Income Tax in the hands of the Trustee at the basic rate for the tax year in which the income arises.
For Income Tax purposes, the Trust will be treated as distributing as an annual payment the aggregate amount shown in the accounts of the Trust as income available for payment to Investors or for investment. In accordance with Section 469 of the Taxes Act 1988 and chapter 10 of the Income Tax (Trading and other Income) Act 2005, the Trust will be deemed to have withheld basic rate Income Tax before distributing (or being deemed to distribute) this income to Investors, who should be able to reclaim this Income Tax, provided they are exempt from tax on investment income as well as on chargeable gains.
If the gross annual payments (if any) made (or deemed to be made) to Investors exceed the income taxable in the Trust, the difference may be assessed on the Trust. However, in broad terms, the tax reclaimed by the Investors should mirror the tax paid by the Trust.
Capital
As the Trust will be open only to investors who are exempt from Capital Gains Tax or Corporation Tax on chargeable gains, otherwise than by reason of residence, any gain accruing to the Scheme will not be chargeable to Capital Gains Tax.
Stamp Duty Reserve Tax
Stamp duty reserve tax will be payable on the transfer of all or part of a investor’s interest in the Trust. No liability to Stamp Duty should arise on the subscription by Investors for their interests in the Trust. Note that taxation levels, bases and reliefs are all subject to change.
Please view our current property investment fund opportunity or our property fund frequently asked questions pages.
Should you wish to find more about our properties and investments or simply seek advice with no obligation - please complete our investment enquiry form. Your details will be secure and safe.