The UK real estate funds industry has reacted warmly to news on Wednesday in the UK government’s Spring Budget pledging to proceed with new tax rules that could aid pension funds and other capital sources to invest in regenerating town centres and accelerate net zero goals.
Melville Rodrigues, head of advisory real assets at Apex Group, called it ‘wonderful news’, while Paul Richards, managing director of The Association of Real Estate Funds (AREF), commented: ‘We very much welcome the government proceeding with tax rules to introduce the RIF and the fact that it will begin legislating through the Spring 2024 Finance Bill.’
A RIF (Reserved Investor Fund) is a fund structure that has seen particular support in the real estate sector, explained Rodrigues, and will deliver benefits for pension fund investors. ‘The RIF will be an efficient structure which enhances the prospects of UK jobs and growth, through for example, attracting pension funds and other productive capital to invest in regenerating town centres and accelerating net zero goals.’
‘I initially proposed the RIF in a personal capacity as a UK citizen knocking on the door of HM Treasury, HMRC and FCA with an innovative fund idea. The concept was then progressed via the Treasury’s UK Fund Regime Review as well as constructive engagement with the officials and other leading members of the UK funds sector.’
‘With the introduction of the RIF, UK fund managers will no longer be forced offshore, and can produce better returns for UK pension investors and their members. It levels the playing field between SMEs and larger managers – as well as supporting net zero goals not just through funding emissions reducing infrastructure, but by consigning to history regular flights for board meetings and substance purposes to offshore jurisdictions – a welcome reputational boost to UK funds touting their own ESG credentials.’
AREF’s Richards said: ‘We share the government’s confidence that the RIF will be a fund vehicle which serves as a valuable addition to the UK’s fund range and look forward to our continuing engagement with Government in developing the RIF implementation legislation.’
‘This fund structure has seen particular support amongst our members and in the real estate sector more generally.’
‘Our sector has needed the RIF solution that, while complementing the available open-ended structures, plugs a gap in the UK fund offering and competes with offshore alternatives: a closed-ended or hybrid fund structure that is effectively tax transparent and unit transfers not inhibited by transaction tax.’