The Government has announced it will prevent groups of companies that own property, but are not property rental companies, from being part of the UK REITs regime unless at least 75 per cent of their gross income comes from the rental of property to tenants.
Senior partner in KPMG’s real estate tax group Charles Beer says by ensuring that groups which are not genuine property investment businesses cannot become REITs, the Government has prevented losses of hundreds of millions of pounds in tax.
Beer says: “The Government had become increasingly concerned that property rich businesses such as pub groups, supermarket groups and others could restructure their businesses so as to come within the REIT rules on technical grounds. A number of groups have announced they were considering such a move, and the loss of tax involved could have been considerable.
“This measure will prevent such an approach by many groups, but it will be important to ensure that the new provisions do not cause difficulty for genuine property investment groups. We understand that pub groups with mainly tenanted estates may still be allowed to join the REIT regime.”