BECOMING A UK-REIT 13
4. TAXATION IMPLICATIONS FOR SHAREHOLDERS
The following table illustrates the effective UK tax rates suffered by investors in different property investment structures owning UK commercial real estate.
uk-reit
offshore company
income gains
exit income gains
exit
UK resident and domiciled Non-UK resident individuals
45.0% 45.0% 20.0% 54.51% 54.51% 20.0% 20.0% 20.0% 20.0% 25.0% 25.0% 20.0%
1 UK tax resident company 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 1 Non-UK tax resident company 20.0% 20.0% 25.0% 25.0% 25.0% 25.0% Tax exempt fund 0.0% 0.0% 0.0% 25.0% 25.0% 0.0%
The position is different for gains since, to the extent that gains are distributed by a UK‑REIT, they are treated as property income in the hands of shareholders and property income is, generally, taxed at a higher rate than either normal corporate dividends or gains. However, in practice, this may not be a significant impediment to investing in a UK-REIT as there is no requirement for UK-REITs to distribute gains on disposals of investment properties.
The table illustrates that, with regard to income receipts, investors generally receive an equivalent after tax return through investing in a UK-REIT compared with other commonly used tax efficient property investment structures and in some cases a better return.
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