Some assistance but number of listed UK-REITS unlikley to rise significantly

The Government has announced a number of new - mainly helpful - measures for UK-REITs including a restriction that will block tax aggressive arrangements put in place to restructure certain groups in order to enable them to join the UK-REIT regime.  Included in the beneficial changes, which will be introduced in the Finance Bill 2009, will be clauses that permit a UK-REIT to raise money by issuing convertible preference shares and clarifications on the various technical conditions.  Interestingly, the restriction on "tied premises" in the Income and Corporation Taxes Act 1988 is disapplied for companies or groups of companies seeking to join the REIT regime.

Stephen Herring, Senior Tax Partner at BDO LLP comments:  “The UK-REIT sector has had something of a rough ride recently with the need for many companies in the sector to adopt capital raising policies to strengthen their balance sheet against falling share prices.  Nevertheless, the UK-REIT regime has demonstrated that the requirement for a closed-ended corporate structure is much more robust in a property downturn than the alternative offshore open-ended fund structures. Although the Chancellor and his advisors still appear keen to support the sector whilst keeping to the primary requirement for UK-REITs business to be fundamentally based in property investment, none of the changes are likely to increase significantly the number of listed UK-REITs.”

Stephen further comments: “The Chancellor does not seem keen though to allow the pub industry to adopt, arguably, artificial measures to bring themselves within the regime but it will be interesting to see whether the new measures on tied premises will ultimately facilitate the desire of certain listed pub landlords to adopt UK-REIT status.”

-Ends-

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