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HMRC internal manual

Company Taxation Manual

Tax elected funds (TEFs): introduction & conditions of membership for the TEF regime: the property condition

Under regulation 69Z46 SI2006/964, a tax elected fund (TEF) must not have a UK property business or an overseas property business as defined in sections 205 and 206 of the Corporation Tax Act 2009 respectively. For further information on what HMRC considers to be a UK and overseas property business please refer to PIM1020.

However, the property condition will not prevent a TEF from holding shares in a UK-Real Estate Investment Trust (UK-REIT). For further information on UK-REITs please refer to the Guidance on UK Real Estate Investment Trusts,GREIT. Property AIFs are explained at CTM48800.

Nor should the property condition prevent the TEF from holding debt instruments (bonds, loan or debenture stock) or simple debts (mortgage loans) that are secured on the borrower’s real property assets as the income received from the debt instrument is interest and not income from a UK or overseas property business.