Despite the removal of the seeding relief exemption from UK SDLT
in March 2006, JPUTs have remained popular with individuals, fund
promoters and investment groups worldwide for the purchase and
holding of UK property.
With the increased interest in UK commercial property and London
residential property, following the rallying call that we have
finally reached the bottom of the market, there has been an upsurge
of enquiries relating to the establishment of JPUTs. In addition,
with the proposed income tax increase for UK based top earners,
such persons are now seeking new ways of generating wealth in a tax
What is a JPUT?
A JPUT is a specialised trust with the trustee holding the
assets on trust for the unit holders (the investors). The trust
instrument sets out the terms of the trust and particularly the
rights of the unit holders in relation to both capital and
What are the benefits and why have they remained
1. Tax advantages
Provided that the JPUT has no Jersey resident unit holders, it
will not be subject to any tax in Jersey. There are no taxes,
registration fees or duties payable in Jersey in respect of the
establishment or administration of a JPUT.
Income - if the JPUT is structured as a
"Baker Trust" it will be transparent for UK income tax
purposes. The benefit is any income of the JPUT will be directly
attributable to the unit holders (pro rata) and they will be able
to set off any expenses of the JPUT against such income.
Distributions by the unit trust can usually be paid gross to
non-Jersey resident unit holders.
CGT - where the JPUT is managed and controlled
in Jersey and the trustee is based offshore, the trustee will be
exempt from UK capital gains tax on the sale of UK real
IHT - another tax planning advantage is that
units in the JPUT are considered to be non-UK situs assets for UK
inheritance tax purposes.
SDLT - the sale of the units can be made free
of any UK Stamp Duty Land Tax.
A unit, for the purposes of the Security Interests (Jersey) Law
1983, is equivalent to a share in a company and as such, if
required, can be subject to a security interest arrangement for the
purposes of securing a loan.
JPUTs are extremely flexible and tend to be less restrictive
than its cousins in other jurisdictions (such as UK REITs). A few
No restriction on the percentage interest of a unit holder or
the number or type of classes of units.
No limit on gearing.
It is possible to make distributions out of capital of a JPUT
without the need to meet solvency or other tests.
No portfolio restrictions - the portfolio can consist of a
single property or many properties.
Can be open ended or closed ended and may easily be listed on
the LSE or the CISX.
Procedure for winding up of a JPUT is straightforward and
4. Tried and tested
JPUTs are regularly structured as collective investment funds.
UK advisers and clients are familiar with and understand the
structure and are therefore happy to replicate for new investments.
Since administrators in Jersey have being working with the
structure for years now they have established expertise in this
From a regulatory point of view, this is determined by the
number and type of investors. For the more private structure, it is
possible to obtain regulatory consent within 3 days.
JPUTs are also being used for family business and succession
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Many people are baffled by trusts, the purpose of which they don't fully comprehend. Some even regard them with suspicion, as tools of of opaque tax evasion strategies of a type favoured by wealthy individuals.
We were recently instructed by a Bank in relation to a regulatory matter. The Bank had made a suspicious activity report to the Financial Investigation Unit ("FIU") due to their concerns about the potential source of funds in an account.
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