BECOMING A UK-REIT 19
DIVIDEND POLICY A key requirement of the UK-REIT regime is that at least 90% of net property rental profits must be paid out as distributions to investors each year. This could result in a different dividend policy being required, particularly if profits have previously been reinvested in the business. Care will need to be taken to ensure that there are no banking or other commercial restrictions on paying distributions. A UK‑REIT is not treated as failing the distribution condition to the extent that a company within the group is prevented from paying a dividend due to a lack of distributable reserves. If a UK-REIT has an investment in another UK-REIT, it must distribute 100% of the PIDs received.
TAX PROFILE OF THE GROUP Consideration should be given to the current tax profile of the group. The main feature of a UK-REIT is that it is exempt from UK corporation tax on property rental business profits. Therefore, if a group is not currently paying UK tax, either as a result of brought forward tax losses or its charitable, mutual or sovereign status, there may be little tax benefit of UK-REIT status. It should be noted that future gains on disposal of investment properties within the regime will not be subject to UK tax and this will lead to a reversal of any accrued deferred tax on unrealised gains at the time of entry to the UK-REIT regime.
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