Investors, who funded through Individual Savings Account (ISA), pension fund or Self-Invested Personal Pension (SIPP), as well as charities are exempted from paying UK tax on "property related income and interest payments," under the new Property Authorised Investment Fund (PAIF) structure, according to PORFOLIO Adviser.

The change is expected to increase 20 percent in the £260m fund's current yield for eligible individuals. Those who are ineligible for the PAIF can still be able to invest through a feeder fund, which is structured as a unit trust.

The F&C UK Property Fund was launched in 2010. The structure change for the UK bricks and mortar fund was announced earlier this year and was officially approved in Aug 11. It is co-managed by Guy Glover and Julian Smith.

Glover said,"We believe the fund's conversion to a PAIF is in the long-term best interests of shareholders, many of whom will now be able to benefit from investing in a more tax-efficient way."

He added, "The UK commercial property market is continuing to deliver good performance, which we believe will increasingly reflect improving occupier demand and rental growth. Rental growth is already coming through strongly in London and we see this spreading to the regions. Income return is likely to become the more important element in total returns over the next five years."

Investment Week previously reported that property fund representatives voiced out their impatience at "platforms failure to support tax-efficient Property Authorised Investment Funds (PAIFs) in the face of increasing demand for the products." That's when Guy Glover's F&C UK Property started converting fund into a PAIF. The group actually expects to complete the process in the third quarter this year.

Ascentric is one platform that shows support in PAIFs. Managing director Hugo Thorman acknowledge the situation "chicken and egg" with willingness to adapt. He further added, "The industry needs to move in that direction because it is the best way to run a property fund."

Many property portfolios already converted to PAIFs last year.