Jersey: Jersey Property Unit Trusts And The Proposed UK REIT Compared

Last Updated: 22 July 2006
Article by Nick Kershaw

Most Read Contributor in Jersey, September 2018



Jersey Property Unit Trusts ("JPUTs") have been used extensively as a vehicle to acquire and hold UK property. The key driver for this has been the seeding relief exemption from Stamp Duty Land Tax ("SDLT"), but there are other key attractions of a JPUT. This article summarises the key benefits of a JPUT, compares a JPUT to the proposed UK REIT and outlines the regulatory framework in Jersey for the establishment of a JPUT.

Fiscal Transparency

A JPUT which is structured as a "Baker Trust" is recognised as being transparent for income tax so that for UK tax purposes income is treated as directly attributable to the unitholders and unitholders are able to set off expenses of the JPUT against that income.

Capital Gains Tax

For UK Capital Gains Tax purposes a JPUT is treated as a corporate and hence if it is managed and controlled offshore it can be possible to defer or avoid Capital Gains Tax.

No Stamp Duty

There is no stamp duty in the UK or Jersey applicable to the transfer of units in a JPUT. This contrasts with SDLT of 4% payable on the transfer of UK property and Stamp Duty Reserve Tax payable on the transfer of units in an English unit trust of 0.5%.

Tax Exempt in Jersey

A JPUT, provided it has no Jersey unitholders, will be exempt from taxation in Jersey (except for any Jersey source income, excluding bank deposit interest) and there will be no withholdings on distributions to unitholders.


Unlike an interest in a limited partnership, a unit in a JPUT is much more akin to a share in a company. It will commonly be evidenced by a certificate and is transferable in exactly the same way as a share in a company. Transferring a limited partnership interest is a much more involved and difficult exercise. This makes a JPUT a much more liquid vehicle than a limited partnership, whilst at the same time being fiscally transparent.

Taking Security

For the purposes of the Jersey Security Interests Law, a unit in a JPUT falls within the definition of a "security" and hence can be secured in exactly the same way as a share in a Jersey company, including by way of possessory security where the secured party takes possession of the unit certificates, without the need to entered on the register of unitholders. This contrasts favourably with limited partnerships, where it is only possible to take security by going on the register, with all the implications and potential liabilities that that may bring with it.

No Restrictive Statutory Framework

Unlike a Jersey company, a JPUT is not subject to a statutory framework (other than that which applies to trusts generally) and so for instance there is no prohibition on financial assistance, there are no maintenance of capital rules and there are no restrictions on distributions. Hence, it is possible to make distributions out of capital without the need to meet solvency or other tests and for the unit trust to give security for the indebtedness of unitholders without being subject to financial assistance type rules. The lack of a restrictive statutory framework gives complete flexibility in terms of the structuring and operation of a JPUT, subject only to fiduciary type duties which would be applicable to any trust.

Joint Venture Vehicle

A JPUT is an effective vehicle for a joint venture type arrangement involving, for instance, an equity provider, a property manager and a lending bank. In particular, a JPUT can be structured with different classes of units so that the equity provider would receive normal investor units whilst the property manager would receive performance fee units giving it an entitlement to an enhanced return depending on performance of the JPUT. An equity provider may wish in due course to introduce further investors and a JPUT provides an easy and effective structure to allow for this. In addition, for the reasons outlined above under "Taking Security", a JPUT is an effective vehicle to lend to and take security over.

Vehicle for Investment Funds

JPUTs are a well recognised vehicle for collective investment funds and there are a large number of JPUTs structured as investment funds. In particular, a JPUT is an excellent vehicle in which to acquire property with one or two initial investors with a view to introducing further investors in due course.


Unlike an interest in a limited partnership, a unit in a JPUT can easily be listed, and in particular there are a number of JPUTs listed on the London Stock Exchange and the Channel Island Stock Exchange ("CISX"). The CISX has now been given recognition by the UK Financial Services Authority (FSA), ("Her Majesty's Commissioners of Revenue and Customers Inland Revenue") and the SEC and hence a JPUT which is listed on the CISX is an eligible investment for a large number of investors including SIPPS and SAPS.

Special Purpose Trustee

It is possible to establish a special purpose company to act as trustee of a JPUT, and there is no requirement for a separate manager. As a special purpose company, the board of the trustee can be populated with directors nominated by the client and provided the trustee acts only as the trustee of the particular JPUT, it will be exempt from the legislation and codes of conduct applicable to professional trustees (see 'Financial Services Law' below). Using this structure avoids the additional costs and complexity of having a separate management company.

Administration Experience in Jersey

There are a large number of JPUTs administered in Jersey and the Island has built up significant expertise in this area, providing for efficient administration of JPUTs. In particular, there are a number of people with property experience who are able to serve on the boards of the trustee/manager, thus assisting with the JPUT being treated as managed and controlled in Jersey.


The UK Government has now published its draft legislation and explanatory notes setting out the key features of the proposed REITs Regime. The following is a comparison in tabular form of certain aspects of those proposals with a JPUT.



Must be listed on a recognised stock exchange (not necessarily the London Stock Exchange - could be CISX).

No requirement for a listing on a recognised stock exchange.

If a shareholder of a UK REIT controls 10% or more of the share capital/voting rights, there will be an additional tax charge.

No restriction on the percentage interest of a shareholder.

May only have one class of ordinary shares and fixed rate preference shares.

No restriction on the number or type of classes of units. Importantly, a JPUT can have an ordinary class of units and a "carried interest" class of units

Income from non-property rental activities (including development activity) subject to corporation tax at 30%

As a JPUT is fiscally transparent, no income tax is payable at the level of the JPUT.

Distributions of income and capital are subject to withholding tax at 22%.

No withholdings on distributions.

75% of the income and asset value of the REIT must relate to property rental business.

No limits on percentage of business which constitutes property rental business.

Must distribute 90% of its net taxable profits before corporation tax filing date.

No requirement to distribute profits within any particular period.

A limit on gearing of approximately 70%.

No limit on gearing.

Property rental business must include at least three properties.

A JPUT could include only one property.

No single property must represent more than 40% of the total value of the properties in the property rental business.

Portfolio can include a single property.

Must be a body corporate


Fiscally transparent for income tax and treated as a body corporate for CGT.

Restrictive statutory framework applicable to companies does not apply.

Must be UK tax resident.

No requirement for UK residency.

Must not be an open-ended investment company.

Can be open-ended.


There are three main pieces of legislation relevant to the regulation of a JPUT, namely the Control of Borrowing (Jersey) Order 1958 ("COBO legislation"), the Collective Investment Funds (Jersey) Law 1988 ("CIF Law") and the Financial Services (Jersey) Law 1998 ("FS Law"). The level of regulatory intervention in Jersey is, broadly speaking, dictated by the number and type of investors, and can be divided into four levels.

Very Private Unit Trusts

On its establishment, a JPUT will require a consent from the Jersey Financial Services Commission (the "Commission") to the raising of money and issue of units under the COBO legislation. For a simple investment holding or joint venture arrangement with no more than 15 investors, obtaining such consent is normally a formality taking a couple of days to process, subject to the disclosure to the Commission (on a non-public, confidential basis) of details in relation to ultimate beneficial ownership. There will be no regulatory intervention in document review and no ongoing monitoring.

"COBO only Funds"

"COBO only Funds" are regulated under the Control of Borrowing legislation. This type of structure is applicable where the arrangement involves an element of pooling of funds by more than one investor and units in the JPUT are offered to potential investors by or on behalf of the JPUT by way of an offer document and/or there are more than 15 investors. For this type of arrangement, provided the units in the JPUT are not to be offered to more than 50 investors or listed on any stock exchange, the Commission will only review the offering document and the regulatory policy is flexible. The Commission will require the trustee of such a JPUT to have two Jersey resident directors on its board and may require the JPUT to have a Jersey manager. The Commission will also wish to be satisfied as to the stature of the promoter.

Collective Investment Funds

The CIF Law will apply if units in the JPUT are to be offered to more than 50 investors or are to be listed on a stock exchange. Under the CIF Law, Jersey functionaries to the JPUT must obtain permits from the Commission. For Non-Expert Funds (as to which, see below), permits will not be granted until the Commission is satisfied with the stature of the promoter and the structure and the documentation of the JPUT itself. The Commission will again require the trustee of such a JPUT to have two Jersey resident directors on its board and will furthermore require the JPUT to have a Jersey manager. In addition, the Commission will place conditions on the permits it issues to the functionaries so as to facilitate ongoing monitoring. The authorisation process generally takes four to six weeks. In addition, if the fund is open-ended, the Guide to Open-Ended Unclassified Collective Investment Funds will apply which sets out certain documentary and structural requirements in relation to the JPUT.

Expert Funds

For JPUT funds aimed at institutional and high net worth investors a new expert category of funds has been introduced in Jersey which is subject to a very light degree of regulation. Expert Funds can be established within a matter of days on the basis of a self-certification approach without the requirement for any formal regulatory review of the fund or its promoter. In particular, an Expert Fund is not required to adopt any prescribed investment or borrowing restrictions or risk diversification strategy and the requisite permits to the establishment of the fund will be issued within a matter of days.

As with "COBO only" Funds and Collective Investment Funds, the Commission will require the trustee to have two Jersey resident directors on its board but it will not require the JPUT to have a Jersey manager so long as (for an open ended fund) it has a separate Jersey based administrator or (for a closed ended fund) the trustee fulfils this function. Each investor is required to sign an investor warning and must fall within one of the prescribed "Expert Investor" categories. Subject to such requirements being met, the application process is fast, flexible and streamlined. For further information on Jersey Expert Funds please refer to our client briefing on this subject.

Financial Services Law

The FS Law regulates trust company business and requires those carrying on trust company business to be registered under the FS Law and to comply with the Trust Company Business Codes of Practice issued pursuant to the FS Law. Where the trustee of a JPUT is a professional trustee company it will have such a registration. This does not mean that a JPUT is obliged to use a professional trustee. The FS Law specifically exempts a private trustee company from being required to register under the FS Law provided it meets certain conditions. Consequently, the trustee of a JPUT can be a company incorporated for this specific purpose owned by the unitholder or, where it is preferable to keep this entity "off balance sheet," it can be owned by a charitable trust. Ogier can provide a charitable trust/charitable trustee service for this purpose.

The conditions which the private trust company must meet to take advantage of the "private trustee company" exemption are as follows:

  • its purpose must be solely to provide trust company business services in respect of a specific trust or trusts;
  • it must not solicit from or provide trust company business services to the public; and
  • its administration must be carried out by a registered person registered to carry out trust company business under the FS Law.

(Ogier Real Estate Services Limited and Ogier Fund Administration (Jersey) Limited are companies registered under the FS Law and can be used to fulfil condition 3 above.)

Due Diligence

Prior to establishing a private trustee company and a JPUT, the administrator will need to identify the beneficial owners and may need to obtain due diligence documents to meet its obligations under local anti-money laundering legislation. Consequently, where an SDLT planning vehicle is being established and the units are to be held by one entity and then transferred to another, due diligence will be required in respect of both the vendor and the purchaser.


Ogier have been involved in establishing a large number of JPUTs and have developed standard form documents dealing with each aspect of the transaction. A copy of our action list and a list of documents required to establish a JPUT are available on request.

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