We’ve worked on a number of property development funds recently. They have all been structured as unregulated collective investment schemes but have taken a variety of approaches in terms of structure, tax and regulation.
Often funds employ a combination of a Limited Partership for individual investors, and an Exempt Property Unity Trust (EPUT) for Capital Gains Tax exempt investors like Self-Invested Personal Pension (SIPP) schemes and Small Self-Administered (SSAS) pension schemes. Usually, the EPUT is a partner in the Limited Partnership.
This is where it gets slightly more complicated… If the fund invests in property directly, the promotion of the fund may be more tightly restricted than if it invests in the equity of an unquoted company. Many, in fact, do the latter. This company may then purchase and develop the property, it may invest in a Special Purpose Vehicle (SPV), or it may make loans to a development company.
Often, where investments or property assets are based overseas, one or more of the companies is too and the limited partnership is usually ‘tax transparent’ so investors are responsible for paying their own tax.
Where the property investment fund is structured as an unregulated collective investment scheme, the promotion of the scheme will be heavily restricted (but often wider than firms think).
