UK Real Estate Investment Trusts (REITS)

A memorandum discussing the features of UK Real Estate Investment Trusts (REITs), which have been permitted in the UK since 01 January 2007.

To qualify as a UK REIT (or UK REIT Group), and to prevent tax charges arising, various tests must be met including:

(i)  the parent company must be listed

(ii)  it will have to pay a 2% charge on the gross market value of its rental properties to
 enter the regime

(iii)  its property rental business must represent at least 75% of its total profits
 and assets

(iv)  it must meet certain minimum investment diversification requirements

(v)  it must distribute annually at least 90% of its income profits

(vi)  for its property rental business, the ratio of 'profits' (gross income) to 'external financing costs' must be at least 1.25:1

(vii)  it must ensure that corporate shareholders owning 10% or more of the UK REIT do not receive any dividends

This memorandum discusses:

• the nature of a UK REIT
• how companies enter the UK REIT regime
• the requirements for UK REIT status, and the effects of such status
• listing requirements
• the application of the tax regime in relation to UK REITs
• and leaving the UK REIT regime

Gavin Brown (partner), David Waterfield (partner), Steve Edge (partner), William Watson (partner)