UK REITS - TAX AND REAL ESTATE INVESTMENT TRUSTS


Reits World

REITS Introduction
 
REITS Structure
 
REIT Qualification
 
Select from the Above List for Information on a Real Estate Investment Trust
 


UK REIT

Information covering the UK REITS Scheme.

 


Tax Treatment of REITS


Tax Treatment of REITS

So long as at least 75% of the company’s activity relates to the ring fenced property letting business both in terms of income and assets (rather than services provided to that business) it will benefit from favourable tax treatment. That is an exemption from Corporation Tax on both profits and capital gains the result of which should be strong dividends to shareholders. In terms of distributing it’s income the company is required to withhold basic rate tax on the distribution. As with distributions from shares generally, investors will not receive a tax credit in respect of this.


Tax Treatment for Shareholders

The principle behind UK REITS is to create a position whereby investors can invest in a portfolio of properties as is they owned them directly. Thus UK REITS will effectively be a “pass through” organisation, the effect of which is to transfer the income and gains of the business through the company exempt of tax to investors who will then assume the tax liabilities.

REITS


Tax Exemptions for Individual Investors

It is intended that shares in UK REITS shall be eligible to be held in Individual Savings Accounts (ISAs), Personal Equity Plans (PEPs) and Self-Invested Personal Pension Plans (SIPPs) subject to the existing limits and rules. This would exempt all income and gains from tax making such investments highly attractive.

For more information: SIPPS



Notes: At the time of writing this is our understanding of the draft legislation and key points relating thereto. Final legislation is expected later in 2006.