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Reit route closed to non-rental companies

The Government has tightened up the criteria on gaining real estate investment trust status to stop property-rich businesses that are not property rental firms from becoming Reits.

Companies that own property but are not property rental companies will be prevented from being Reits unless at least 75 per cent of their gross income comes from the rental of property to tenants.

KPMG senior partner in the real estate tax group Charles Beer says the Government has prevented losses of hundreds of millions of pounds in tax.

He 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 that they were considering such a move and the loss of tax involved could have been considerable.

“But it will be important to ensure that the new provisions do not cause difficulty for genuine property investment groups.”

Trade body Reita head of external affairs Dave Butler says: “We wish the Government had done more on enabling residential and private Reits, which is something the industry has called for.”

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