By Therese Ryan, Client Services Director, Isle of Man
UK real estate has long been a cornerstone of family office investment portfolios, thanks to its blend of long-term capital appreciation, stable income opportunities, and generational wealth preservation. UK commercial property notably delivered a total return of 7.7% in 2024. Not only was this higher than the total returns seen in 2022 and 2023, but it exceeded the average annual return of 7.2% recorded by the CBRE UK Monthly Index since 2000.
But direct ownership can mean significant administrative overhead, visibility challenges, and tax complexity. Isle of Man Property Unit Trusts (IPUTs) have thus emerged as a preferred and strategic vehicle for holding UK property. IPUTs offer control, tax transparency, and cost efficiency, making them a compelling option for the modern family office and investors seeking to invest in UK real estate.
What is an IPUT?
An IPUT is an Isle of Man trust-based structure used to acquire and hold UK real estate. It operates under Isle of Man trust law, with property held by a trustee on behalf of its investors, known as unitholders.
IPUTs can be structured as Baker Trusts, which allow income generated by the assets to accrue directly to the unitholders without forming part of the trust fund. Income is taxed at the unitholder level rather than the trust level, providing a distinct benefit for exempt investors such as UK pension funds.
IPUTs are generally categorised as Exempt Schemes (as defined in schedule 3 of the Isle of Man Collective Investment Schemes Act 2008), provided that they have 50 or fewer investors and are not offered publicly, making them especially well-suited to family offices or investors seeking privacy and control.
Key benefits of using an IPUT structure
- Familiar legal framework: IPUTs are established under trust law principles, which are closely aligned with those in England and Wales, making them easy for UK-based legal teams to implement and understand
- Tax transparency: Income is passed through to unitholders, allowing them to offset any expenses incurred by the IPUT against income. Unitholders can also avail of a transparency election to be taxed directly on disposals of the underlying assets for capital gains tax purposes
- Streamlined set-up: If the IPUT qualifies as an Exempt Scheme, no approval is required from the Isle of Man Financial Services Authority (FSA), making IPUTs easy to establish
- Privacy: IPUTs are not legal entities, and there is no public requirement to register the trust deed or list of unitholders in the Isle of Man, preserving confidentiality
- Efficient VAT treatment: VAT registration is typically completed within five working days, and the IPUT can be grouped with companies in other jurisdictions for VAT purposes
- Flexible governance: No fixed statutory rules govern how unitholders interact or how the IPUT must be structured, providing significant flexibility in drafting the trust deed
- Stamp duty savings: Property can be transferred by selling units in the IPUT rather than the property itself. Stamp duty is not charged on unit transfers in the Isle of Man
- Unrestricted distributions: There is no requirement to distribute only from realised profits or to meet solvency tests. Distributions of income or capital can therefore be made more freely, depending on the trust deed
How are IPUTs taxed in the UK and the Isle of Man?
IPUTs structured as Baker Trusts are highly tax efficient. In the Isle of Man, there is no income, inheritance, capital gains or gift tax for non-resident unitholders, as long as the IPUT doesn’t hold local property (on the Isle of Man).
In the UK, IPUTs are treated as transparent for income tax purposes, meaning that income is taxed in the hands of the unitholders based on their UK tax status.
How IQ-EQ can help
IQ-EQ provides full trustee and administrative support for IPUTs tailored to the unique needs of family offices and individual investors.
Services include:
- Trustee provision and governance support
- Trust deed drafting and unitholder register maintenance
- Valuation and unit pricing, including quarterly NAV updates
- Distribution management and unit issuance/redemption
- Administrative services, including bookkeeping, compliance, and VAT support
- AML/CFT and regulatory compliance, including MLRO and risk management services
- Filing and oversight under the Isle of Man’s CIS Act 2008
Whether you’re exploring your first UK property acquisition or managing a growing real estate portfolio, IQ-EQ’s Isle of Man team has the expertise to support your goals. In our role as trustee, we tailor support to the specific needs of each family office, from handling the full operational workload to working in close partnership with in-house teams.
Contact our Isle of Man team today to explore how an IPUT can support your family office’s real estate strategy.
