Types of property There are several different legal structures that property funds can use, which affect how they are set up and how they are taxed. fund These include unit trusts, Real Estate Investment Trusts (REITs) and Property Authorised Investment Funds (PAIFs). Choosing the structure of Property Authorised Investment Funds your fund (PAIFs) This section of our guide explains some of the legal These are similar to unit trusts, but have a legal structure structures of property investment funds. This information that makes them more tax-efficient for certain investors. is important as there can be significant benefits in How PAIFs can give you more choosing a fund with the right structure for your needs, particularly if you plan to hold it in an Individual Savings for your money Account (ISA). Please note, ISA tax advantages depend ‘Bricks and mortar’ unit trusts have to pay 20% tax on on your individual circumstances and ISA tax rules may the income they receive from rent, which reduces the change in the future. amount they can pay to their investors. However, PAIFs Three types of fund leave tax payments to the investor. Property unit trusts This means that when a PAIF is held in an ISA (where you A property unit trust is simply a fund that invests in don’t have to pay tax on investment income), the income property, where the investors own a specified number from a ‘bricks and mortar’ PAIF can be considerably of units depending on how much money they have more than the income from a comparable unit trust. invested. The value of the units depends on the value of the properties in which the fund is invested. Real Estate Investment Trusts (also known as REITs) These are investment companies that own and manage property. This means they have a share price that can be different to the value of the properties they hold (as the price is affected by supply and demand). They must pay out at least 90% of the taxable income they receive to investors in the form of dividends. 8