The £1.2bn L&G UK Property Trust was subject to an “overwhelmingly” positive vote by unitholders to convert the fund into a property authorised investment fund at an EGM that took place on Friday (9 May).
The conversion will take place on 27 May and will result in a more tax-efficient income generation for investors, in the renamed Legal & General UK Property Fund.
M&G, Standard Life Investments converted their property funds – respectively £2.6bn and £672m in size – into PAIFs last year, while Kames Capital received permission to open its own product at the end of March.
Currently, non-PAIF structures must pay 20% corporation tax on the rental income they receive, Income distributions are then paid to the fund's investors, who cannot claim back the tax.
Clearer tax treatment
But rather than paying this corporation tax, PAIFs gather their income from three streams – rental, interest and dividends – treated separately for tax purposes.
Distributions from rental income and interest can be paid out gross to qualifying investors into an ISA or personal pension, for example.
LGI will also create a feeder fund within a unit trust, which will allow unitholders who are ineligible or unable to invest in a PAIF to remain invested.
Lead manager is Michael Barrie, supported by Matt Jarvis. L&G Property runs £11.9bn in the asset class.
