IFM05510 - Investors in property authorised investment funds (PAIFs): investors within the charge to income tax - property income distributions
Tax treatment for income tax payers 鈥� general (regulation 69Z18 SI 2006/964)
The property income distribution (PID) is generally taxable as profits of a UK property business (within the meaning of section 264 ITTOIA 2005). The exception to the property income treatment above is for members of Lloyd鈥檚 and financial traders, for whom the PID is a receipt of their trade. Persons within the charge to income tax will receive PIDs net of basic rate tax.
Basic rate taxpayers
Basic rate taxpayers have no further tax to pay on the PID, as their tax liability is met in full by the tax deducted.
Individuals not liable to income tax
Investors who are not liable to tax on income can claim repayment of all the tax shown as deducted on the statement attached to the PID, by completing a claim form R40 in the normal way 鈥� further information is available on the HMRC website at: /驳辞惫别谤苍尘别苍迟/辫耻产濒颈肠补迟颈辞苍蝉/颈苍肠辞尘别-迟补虫-肠濒补颈尘-蹿辞谤-谤别辫补测尘别苍鈥�.
Higher and additional rate taxpayers
Higher and additional rate taxpayers will have a further liability to tax on their PID. For example, if a higher rate taxpayer receives a net PID of 拢80 after deduction of 拢20 tax, the amount of income brought into charge is 拢100, and the tax due in respect of the PID is 拢40 (拢100 at 40%). The 拢20 tax shown as deducted is credited against the 拢40 due, leaving a further 拢20 to pay.
Higher and additional rate taxpayers who do not normally complete a tax return will need to inform their tax office when they receive a PID so that their tax codes can be adjusted to collect the additional tax. If the amount of additional income from the PAIF is large they might be asked to complete a tax return.
Completion of tax returns
Although chargeable to tax as property income, the PID should not be shown on the Property Pages so investors do not need to obtain those pages if they have no other property income. The gross amount of any PIDs should be recorded together with the total amount of tax deducted in the 鈥榦ther income鈥� section in the main tax return. Losses on other property business, for example income from buy-to-let properties, cannot be set off against a PID.