BECOMING A UK-REIT 16
UK-REIT status will be of less relevance to companies or groups with only a small UK presence.
Examples of common restructuring undertaken by companies considering entry into the UK-REIT regime include:
UK-REIT REQUIREMENT / OPPORTUNITY Parent company of the UK-REIT group is tax resident only in the UK. A UK-REIT is generally required to be admitted to trading on a recognised stock exchange, unless 70% is owned by a qualifying institutional shareholder (from April 2022).
STRUCTURING SOLUTION
Establishing new parent company on top of the group or transfer management and control of parent company to the UK. Structure of management team may need to change or expand, for example to include non-executive directors. Changes may be required to accounting policies and financial reporting and IT processes and controls to make them appropriate for a publicly listed company. The process and timetable for admission to trading will need to be considered and appropriate advisers engaged. Rationalise group by reducing number of subsidiaries or property holding structures, subject to Stamp Tax implications. Restructuring of inter-company loan and guarantee arrangements to manage residual income e.g. internal interest. Restructure property management function. This may be preferable from an investor perspective and avoid unnecessary tax costs.
A UK-REIT may not need to hold properties in SPVs.
Residual income received in the UK-REIT is taxable.
Consider internalisation of property management function.
Ensure that any joint ventures are tax-efficient once the group is in the UK-REIT regime. UK-REITs are required to undertake all transactions with related parties on arm’s length terms.
Consider joint venture notices.
Consider the group’s transfer pricing policies and whether HMRC approval of the policies should be sought.
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