The British Property Federation has welcomed changes to the UK REIT regime that could attract significant investment in property in the UK.
REITs announcement in HMRC’s Overview of Tax Legislation and Rates document
3.22 Real estate investment trusts (REITs) — The Government will commence an informal consultation with the industry and the representative body on the REITs legislation shortly after the Budget. Subject to the responses the Government will make changes both to reduce the barriers to entry and investment and to reduce the regulatory burden for existing and future REITs. The proposed legislation will be included in Finance Bill 2012. Further information will be posted on both the HM Treasury and HMRC websites as it becomes available. The consultation will seek views on:
* the introduction of a diverse ownership rule for institutional investors which will enable them to meet the non-close company rule. This will enable institutional investors to set up UK-REITs; 
* allowing cash to be a “good” asset for the purpose of the REIT balance of business asset test. This will allow UK REITs to make investment decisions on a commercial basis; 
* extending the time limit for complying with the distribution requirement in particular circumstances involving stock dividends. This will reduce the administrative burden on those REITs that pay out dividends on a six monthly basis; 
* redefining “financing costs” for the REIT interest cover test to give certainty regarding this requirement; 
* abolishing the conversion charge for companies joining the REIT regime; 
* introducing a fixed grace period for new REITs to meet the non close company requirement. This will enable start up UK-REITs to build sufficient reputation to attract shareholders; 
* relaxing the requirement for a UK-REIT to be listed on a recognised stock exchange. This will encourage entry into the REITs regime, particularly for start-up property investment companies; and 
* making technical changes to the REITs legislation.
Peter Cosmetatos, director of Finance at the British Property Federation, said: "We are delighted that the government has grasped this opportunity both to make the UK REIT regime more attractive for new entrants and to make it work better for the UK’s REITs. The forthcoming informal consultation covers many of the issues we have lobbied government on in recent years and in some respects goes even further, with the mooted abolition of the 2% conversion charge which is such a barrier for offshore funds tempted to come back to the UK.
"We are optimistic that, taken together, these proposals could have a real impact on boosting investment in UK property and in the scale and health of the UK’s REIT sector, and look forward to participating in the consultation."
Contact the BPF on 020 7828 0111
