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HMRC internal manual

Company Taxation Manual

AIFs: Property authorised investment funds (Property AIFs): tax treatment of distributions in the hands of participants: participants within the charge to corporation tax

Property income distributions (PIDs)

For corporate tax payers, under regulation 69Z18 SI 2006/964, PIDs are generallycharged to corporation tax as profits of a Schedule A business. This is unlike normalcompany distributions, which are exempt from tax in the hands of most UK companies. ThePID will, in general, be paid without deduction of tax to persons within the charge to UKcorporation tax (regulation 69Z24 SI 2006/964).

The exception to Schedule A treatment is where the recipient is a member of Lloyd’sor a financial trader, when the PID is treated as a receipt of their Schedule D Case Itrade.

PAIF distributions (interest)

PAIF distributions (interest) are treated as if they were payments of yearly interest.

As with a PID, a PAIF distribution (interest) is generally paid without deduction of taxto persons within the charge to UK corporation tax and the participant is, consequently,treated as receiving a gross amount of yearly interest (Regulation 69Z19 SI 2006/964).This is treated as a Schedule D, Case III receipt.

As with PIDs, no tax credit is available under section 231 ICTA 88 for PAIF(distributions) interest.

PAIF distributions (dividends)

Under regulation 69Z20 SI 2006/964, PAIF distributions (dividends) received byparticipants are treated in the same manner as any other UK company dividend. Hence, theyare exempt in the hands of participants within the charge to corporation tax.

Unlike a normal AIF dividend distribution, corporate streaming rules do not apply to PAIFdistributions (dividends) (regulation 69Z20(2)).


Normal rules for corporation tax on chargeable gains apply when a company disposes ofshares in a Property AIF.

The only exception to the treatment of disposal is where the shares have been held as partof the long-term fund of a life assurance company. In these circumstances, the shares aretreated in the same way as shares in other authorised investment funds, with changes inthe fair value of the holding being taxable each year.