What is a REIT?
The REIT regime, combined with the traditional strengths of London’s capital markets, has created opportunities for the growth of the property investment sector. The legislation setting out the rules for REITs in the United Kingdom came into effect in January 2007 and in the following years, a number of larger listed property groups converted to UK-REITs as well as a number of start up UK-REITs being created. REITs enable property companies to access equity markets and to give end-investors performance related to the underlying property assets, without any tax leakage. UK-REITs therefore provide investors with wider opportunities for accessing an important alternative asset class
How to qualify as a REIT?
There are a number of qualifying conditions that a company needs to meet in order to become a UK-REIT. These qualifying conditions, as determined by HMRC, fall into 3 categories; company conditions, property rental business conditions and balance of business conditions. In particular, a potential UK-REIT has to carry out a property rental business which can be a UK property investment business or an overseas property investment business. At least 75% of the group’s profits must derive from that property rental business and at least 75% of the group’s gross assets must comprise assets or cash involved in the property rental business.
Further details of the conditions required to be met to enter, and remain within, the UK-REIT regime can be found on the HMRC website at the link below:
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