BECOMING A UK-REIT 09
3.
POTENTIAL BENEFITS OF BECOMING A UK-REIT
Conversion to UK-REIT status may enable a group to diversify its investor base, enhance its ability to raise fresh equity and reduce overall gearing. The key attributes of a UK-REIT which are particularly attractive from an investor perspective are: X Rental profits and chargeable gains on disposal of investment properties are normally exempt from corporation tax in the UK-REIT. Since April 2019, disposals of UK property-rich companies are also exempt from corporation tax. When coupled with the fact that at least 90% of net property rental profits must be paid out as PIDs each year, this makes a UK-REIT attractive to many investors as it provides for regular returns whilst avoiding the double taxation that investors in property companies may otherwise suffer. Accordingly, shares in a UK-REIT have certain characteristics of a ‘fixed income’ product. Tax-exempt investors (e.g. pension funds, charities and certain institutional investors) obtain significant benefit as they will suffer no tax on their investment return
X The UK-REIT structure is recognised as a favoured property ownership structure by many international investors, some of whom may be prevented from investing in non-REITs. Joining the UK-REIT regime therefore gives property companies access to the ‘REIT’ brand X Investors holding shares in UK-REITs have access to portfolios of properties in the office, retail, industrial and healthcare sectors for a lower capital outlay compared to direct investments and in a more liquid form. A summary of the effective tax rate on returns offered to investors by a UK-REIT in comparison to other property investment structures is set out in Section 4.
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