Important changes to UK Property Funds

20 February 2020

The UK Finance Act 2019 extended non-resident capital gains tax (“NRCGT”) to include disposals by non-UK residents of all UK property holdings (previously it only applied to disposals of residential property holdings).

In addition, NRCGT has been extended to include all indirect property holdings, including those that are held via non-UK resident insurance policies and via “property rich” collective investment schemes.

A property rich collective investment scheme is defined as a fund that has 75% or more of its value invested into UK property.

This means that any investment into UK physical property rich funds (unless via a Real Estate Investment Trust (REIT)) through an Isle of Man (IOM) Portfolio Bond will be subject to the new tax on any capital gains.

Friends Provident International (FPIL) has considered carefully the consequences for our customers of this change and has taken the decision that it is in the best interests of customers to prohibit further investment into UK physical property rich funds; unless this is via a REIT structure.

Therefore, from the date of this communication:

• No new investments will be accepted into UK physical property rich funds.
• No increases of existing investment will be accepted into UK physical property rich funds.
• Any existing investment in UK physical property rich funds can currently be retained. However, this position is currently under review and could change in the near future.
• Any redemption of UK physical property rich funds will be accepted as normal.

If you have any queries in relation to this matter, please contact TechnicalInvestments@fpiom.com.