A UK Real Estate Investment Trust (REIT) is a company or a group of companies that receives the majority of its income as rents from real estate and has elected to be a REIT under the UK’s tax legislation. A REIT is exempt from corporation tax on property rental income and gains, provided certain conditions are met.
UK REIT legislation was introduced to provide a structure which more closely mirrors the tax outcomes of direct ownership in real estate but with the lower risk profile of collective investment. The REIT regime was originally legislated for in the Finance Act 2006 but it is only in the last few years that the Government has been proactive in addressing some of the practical problems of the REIT conditions and has sought to relax them. The Finance Act 2022 and Finance Act 2023 contain the most recent changes to the REIT rules, which are intended to make the regime more accessible and less burdensome. Further draft legislation for inclusion in the Finance Bill 2024 was also published in July 2023.
As a result of these changes we are seeing increased activity in this space and are assisting clients with set up of REIT structures and converting existing UK real estate investment portfolios into REITs. In particular we have been speaking to various institutional and other types of investors, including overseas REITs, pension funds, asset managers, PE houses, insurance business and sovereign immune investors.
In this article we explore the basic position of REITs, key conditions and the recent relaxations, potential future changes, and KPMG’s services in this space.
Please do reach out to us if you would like to discuss the topic further.
