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HMRC internal manual

Company Taxation Manual

AIFs: Property authorised investment funds (Property AIFs): deducting and accounting for tax from distributions: deduction of tax from distributions made by Property AIFs

Deduction of tax from property income distributions (PIDs) (regulation 69Z22 SI2006/964)

A Property AIF will pay a Property Income Distribution (PID) net of the basic rate ofincome tax in force for the year in which it is made, unless regulation 69Z24 SI 2006/964applies so that a person is entitled to receive such payments gross, as discussed in CTM48863. PIDs made to a non-resident participant must always bemade under deduction of income tax, unless the recipient is a company carrying on a tradein the United Kingdom through a permanent establishment (see CTM48863).

The tax deducted from PIDs is treated as income tax paid by the recipient and isaccordingly taken into account in determining the income tax or corporation tax payableby, or repayable to, the recipient.

Deduction of tax from PAIF distributions (interest) (regulation 69Z23 SI 2006/964)

Interest distributions are treated as if they were payments of yearly interest, andaccordingly section 874 ITA 2007 requires they will be paid net of income tax at thesavings rate, subject to regulation 69Z24 SI 2006/964 (see below). As with PIDs, andunlike interest distributions from other authorised investment funds, these distributionsare always paid net of tax to non- residents unless the recipient is a company carrying ona trade in the United Kingdom through a permanent establishment.

PAIF distributions (dividends)

Property AIF distributions (dividends) are treated in the same manner as distributionsmade by any other UK corporate and accordingly are paid with a one-ninth tax creditattached. No tax is deducted.

Payments without deduction of tax

Some investors will be entitled to receive PIDs and PAIF distributions (interest)without deduction of tax. For further information refer to CTM48863.