In a major boon to the UK property market, recent changes to Stamp Duty Land Tax (SDLT) have sparked a trend that saw Eversheds Sutherland advise on the largest-ever launch of a UK property fund for Royal London Asset Management (RLAM) in October.
The portfolio, worth over £2.7bn, seeded by the transfer of two existing Royal London property portfolios, includes central London properties in New Bond Street, Covent Garden, Trafalgar Square, Oxford Street and St Paul’s. With a minimum investment of £50m, it is designed to expose the UK’s commercial real estate market to institutional domestic and foreign investors.
The team at Eversheds was led by financial services partner Julian Brown, alongside real estate partner Richard Lampert, financial services partner Pamela Thompson and funds tax specialist Camilla Spielman.
Speaking to Legal Business, Spielman said that this was the first property authorised contractual scheme (ACS) since the government changed stamp duty rules and has a property authorised investment fund (PAIF) feeder fund. The ACS is a UK vehicle that allows eligible investors, including overseas investors, to be paid their rental income gross and makes tax management simpler.
‘This ACS and PAIF combination is marketable internationally, which allows both domestic and foreign institutional investors. It was brought into the UK to mirror what existed in Luxembourg and Dublin. We think it is likely to be the beginning of a trend because it makes so much sense.’
‘The changes in SDLT are such that they enable the funds to be established and for investment to come in potentially without having to pay SDLT on the property into the new fund,’ added Brown.
RLAM is a longstanding client of Eversheds Sutherland, which also advised the asset manager on the creation of the first PAIF, launched in 2010. The benefit of PAIFs is that they are exempt from the 20% corporation tax that tax-exempt investors investing in them cannot recover and are widely marketable.