IFM06130 | Tax elected funds (TEFs): introduction & conditions of membership for the TEF regime: the property condition

Under regulation 69Z46 of SI2006/964, a TEF must not have a UK property business or an overseas property business (as defined in sections 205 and 206 of the Corporation Tax Act 2009, PIM1020 for guidance). A TEF may invest in a property authorised investment fund or UK Real Estate Investment Trust (UK REIT) – see regulation 69Z56.

The property condition does not prevent a TEF from holding debt instruments (bonds, loan or debenture stock) or simple debts (mortgage loans) that are secured on the borrower’s real property assets. Income received from the debt instrument is interest and not income from a UK or overseas property business.