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Good News for Investors - UK REITs Designed to Lower the Barriers to Entry
The UK real estate investment trust (REIT) regime was introduced on 1 January 2007 in response to lobbying by the UK real estate industry for a tax transparent vehicle for collective investment comparable to those found in other major jurisdictions. Despite the tax benefits afforded by the regime for groups that meet the qualifying criteria and opt in, uptake has been relatively low - with only 23 UK REITs currently in existence. Taxand UK explores the proposals that lower the barriers to entry and bring good news to investors.
Since Budget 2011, the Government has been engaged in an informal consultation with the property industry to consider whether some of the conditions for REIT qualification can be relaxed to make the regime more accessible to new entrants and examine some technical aspects associated with the ongoing operation of REITs.
The proposals aimed at attracting new entrants to this sector, include:
- Abolition of Entry Charge
- Introduction of Diverse Ownership Rules for Institutional Investors
- Introduction of Fixed Grace Period for New REITs
- Relaxing the Listing Requirement
The outcome of the consultation will not be known until autumn 2011, when the draft Finance Bill 2012 is published - at which point there will be an opportunity for further lobbying before the final proposals become law next year. While these proposals are aimed at increasing the uptake of the regime, the Government will no doubt want to see that uptake reflected in increased capital flow into the market, rather than the new entrants being smaller property groups taking advantage of the removal of the entry charge. It will be interesting to see whether the measures will entice offshore property investors to come onshore, particularly as the burden of successfully maintaining overseas residence becomes increasingly difficult.
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