M&G set to switch £2bn property portfolio into Paif
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M&G Investments is planning to convert its £2 billion M&G Property Portfolio, managed by Fiona Rowley, into a property-authorised investment fund (Paif) by next year.
An M&G spokesman says: “The key benefit to the conversion is that investors can get gross income with no corporation tax deducted. There have been some hurdles for asset managers looking at converting property funds to a Paif structure.
“One was the need for HMRC to give a capital gains tax exemption on switching investment into a Paif. That exemption has now been granted.”
Paifs are tax-efficient investment vehicle that allows funds to pay gross dividends from property rental income without paying corporation tax. Funds without the structure suffer a 20 per cent charge on their taxable income which cannot be recovered.
An Aviva Investors spokeswoman says the firm is also looking to convert the £1.7bn Aviva Investors Property trust into a Paif structure.
“We think it could ultimately be beneficial for investors but the Paif industry is still at a relatively early stage,” she says.
Hearthstone Investments plans to launch a residential Paif in September.
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