Real Estate Investment Trusts - Draft Legislation
The Government has now published its draft legislation on Real Estate Investment Trusts (REITs), which will be companies listed on the stock exchange which carry out a ‘qualifying property letting business’. To qualify as a REIT, a minimum of 75 per cent of the company’s profits must be derived from property letting and three-quarters of its asset value must be in the form of assets used tin the qualifying activity.
Under the proposed legislation, no more than 40 per cent of the total asset value may be represented by one property.
REITs will be exempt from corporation tax on their qualifying property rental income and will not pay corporation tax on chargeable gains arising which relate to the REIT properties. They will pay corporation tax at the usual rates on the profits arising from non-qualifying activities. They will be required in normal circumstances to distribute 95 per cent of profits, from which tax at the basic rate will be withheld for both UK residents and non-residents.
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