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New Style Property Trusts. 
Within months, hundreds of new-style property trusts are expected to convert their status to become real estate investment trusts, or REITs, following a change in the law allowing them to own property and distribute the gains tax-free. Much of Britain's commercial property, and eventually residential as well, will be held in vehicles that avoid corporation tax and capital gains tax.
The end of this "double taxation" will allow dividends to be paid out of untaxed income from the coming year provided at least 90% is distributed to investors. To convert to a trust companies must pay a one-off charge to the Treasury equivalent to 2 percent of the value of their property portfolio. The changes are expected to attract new investors. The new REITs are also expected to attract investors in residential property. The rules for holding residential property within the new trusts are complicated, but still likely to prove enticing to investors. REITs may eventually prove more attractive than buy-to-let. While buy-to-let has had a strong run, short tenancies can if there is a sudden excess, leave investors with unoccupied properties for lengthy periods with no rental income. FAQs - REITs Q: What is a REIT? A: It's a new type of company that allows investment in commercial or residential property to produce tax-efficient rental income. Ninety per cent of this income must be distributed to shareholders of the UK- REIT and, in return, the company is exempt from corporation tax and capital gains on property sales. Q: Who can invest in a REIT? A: Anyone can buy shares in a REIT, much like a unit trust. Q: Why invest in a REIT? A: REITs avoid paying corporation tax and capital gains, but the investor can also avoid paying tax on their dividend income if their shares are held, say, in an ISA or a self invested personal pension (SIPP). If you require any further information about the services that we provide or would like to review your financial planning position, please contact us |