Jan 14, 2026
Key Takeaways
Guernsey remains a popular jurisdiction for offshore investment in UK real estate
GPUTs continue to be a popular and proven vehicle used in investment structuring for UK real estate (particularly commercial property sales)
GPUTs have many advantages in a UK real estate investment structure, including flexibility, tax transparency and operation costs
The benefits in doing so are well established. These include:
The use of Guernsey investment structures may also benefit investors by providing the ability to manage the property investment vehicle without suffering any local income tax or deductions for withholding.
Unit trusts are not unique to Guernsey and their structure is familiar in UK real estate ownership. Unit trusts are not separate legal entities, but a trust arrangement whereby legal ownership of the trust's assets is vested in a trustee who holds, or trustees who hold, those assets on trust for the benefit of the unitholders. For most practical purposes, a unit trust scheme will operate and be regulated in the same manner as an investment fund structured as a company or a partnership.
The unit trust will generally be established and constituted by a trust instrument made between the trustees or between the trustees and an independent manager. In the former case, the trustees are generally responsible for promoting, managing and administering the unit trust scheme, or for appointing a manager or other adviser to do so. In the latter case, the manager will generally promote, manage and administer the scheme, and the trustees will generally supervise compliance by the manager with its obligations under the trust instrument. Subscription proceeds will be paid to the trustees which will also act as custodian of the investment assets of the fund.
The trust instrument will generally contain provisions regulating the issue, redemption and valuation of units, the appointment and removal of the trustees and the manager or any delegates, the duties, remuneration and borrowing powers of the trustees, investment restrictions and for the winding-up of the trust.
A number of significant recent UK property transactions (particularly commercial property sales) have been structured as property transfers to newly established Guernsey Property Unit Trusts ("GPUTs") or their subsidiaries (for example, by contribution of a property, or a portfolio of properties, to the GPUT or its subsidiary in return for the issue to the contributor of units in the GPUT).
On its establishment, a GPUT does not require any consents from any regulator, however, the trustee will either require a license or an exemption under the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020 (as amended) if it receives a fee for acting as trustee to a GPUT from the Guernsey Financial Services Commission (the "Commission").
If the vehicle is a private investment vehicle, obtaining such consents is normally a formality but information on the beneficial owners needs to be provided on a strictly confidential basis to the Guernsey Registry.
If the vehicle is to be a collective investment scheme that is offered to a number of investors (rather than a non-fund investment vehicle), then, in determining whether the requisite consents will be granted, the Commission will have taken into account the stature and investment management expertise of the promoter and the levels of protection afforded to investors. The substance of any offering document also requires the approval of the Commission and they may also wish to review other principal documentation.
It should also be noted that it is usual for GPUTs to be constituted as 'Bakers Trusts' (so named for the case in English law where the principle originated). A Baker Trust is one where the underlying assets of the trust generate income, and this income accrues for the benefit of the unitholders, as such it does not form part of the assets, where it would be required to be distributed by the trustees to the unitholder. This structuring can be useful for tax efficiencies within the overall structure.
GPUTs can be established and operated as tax neutral vehicles. Income and capital gains taxes are not payable in Guernsey by the GPUT trustees and GPUTs may be structured to be transparent for UK income tax purposes and may elect to be transparent for UK capital gains tax purposes (including in relation to the sale of the GPUT’s underlying assets).
Where UK property is currently held through a GPUT, as an alternative to arranging for a conveyance of the property, we understand that units in the GPUT may be transferred to a third-party purchaser without incurring any charge to Stamp Duty Land Tax ("SDLT"). In addition, no Stamp Duty will be payable on the transfer of units in a GPUT. In contrast, a transfer of units or shares in a UK holding vehicle would normally incur a charge to Stamp Duty and, on a direct sale of the property by conveyance, we understand that SDLT would be chargeable at rates of up to 5 percent (plus VAT) on commercial property. The savings to a purchaser will normally be reflected in the sale price.
In addition, an offshore fund of this nature may be capable of being more widely marketed, to institutional investors, for example, and may be listed on an investment exchange (for example, TISE – which is a recognised stock exchange for HM Customs & Revenue purposes) to facilitate this.
As part of the establishment of a GPUT, investor(s) will subscribe for units in the GPUT at a set price per unit. The subscription proceeds received by the GPUT will then be used to make an investment into UK real estate. Following the acquisition of UK real estate, units in a GPUT, and the transfer of the same, are usually priced by reference to the net asset value of the GPUT.
For commercial and risk management purposes, buying units in a GPUT is similar to buying shares in a private property company. Instead of trading the underlying property, the units in the GPUT are themselves sold to the new investor. In practical terms, the trustees (and the manager, if there is one) will approve the transfer of the units to the investor, in accordance with the GPUT trust instrument, on receipt of a validly executed transfer instrument (and any other documentation required under the terms of the GPUT trust instrument) and on satisfaction of due diligence by the trustees (for anti-money-laundering purposes) on the new investor.
Incoming investors should undertake all of the usual property due diligence (whether by production of certificates of title or otherwise), as well as carrying out due diligence on the unit trust itself and its establishment.
Banks lending to GPUTs to fund property acquisition, or to unitholders to fund the acquisition of the units, will typically request a security package that consists of a Guernsey law security interest over the units in the GPUT themselves, and a direct UK charge, or direct charges, over the UK property held directly or indirectly by the GPUT.
Unit trust instruments generally contain provisions which permit the trustees of a GPUT to provide third party security in support of a unit-holder's borrowing, provided certain conditions are met. Trustees are also able to give guarantees and indemnities as part of a financing.
Banks will often request additional security, and may request general security over the GPUT's assets (usually by way of English law debenture over the GPUT's assets situate in the UK) and/or security over the GPUT's revenue stream (ie rental income) which, if not covered by a debenture, can generally be dealt with by way of a Guernsey security granted by the trustees over the GPUT's rent account.
Care will also be taken by the bank's Guernsey advisers to ensure that the GPUT has all the regulatory consents required, has been properly established and that the GPUT trust instrument contains provisions protecting the bank's position as secured party.
Many notable and significant buildings in the City of London and the wider UK are held by way of GPUTs, making up a portion of the £57bn channeled from around the world into UK via Guernsey. The main advantages of GPUTs are as follows:
Senior Associate/Guernsey
Key Contacts
Managing Partner
Guernsey
