Property taxes

UK Real Estate Investment Trusts (REITS)

Anti-avoidance provisions are to be introduced with effect from April 2009 to ensure that non-property investment groups cannot restructure their corporate groups to meet the conditions of the REIT regime whilst retaining their non-property investment income under the same economic ownership. 

How this affects you

This will be of particular relevance to trading groups with large property holdings (eg pubs, hotels and supermarkets) that have been considering converting into REITs.

Land remediation relief

Two additional land remediation tax incentives will be introduced with effect from 1 April 2009. The first is the long-awaited extension of the relief to the removal of naturally occurring contaminants including Japanese knotweed, radon and arsenic. The second extends the relief to include certain expenditure on bringing land back into productive use which has been derelict since April 1998 (where the land was derelict when acquired by the owner).  In addition, certain anti-avoidance rules on relief for payments to sub-contractors will be restricted so that they only apply to payments to connected parties.

How this affects you

These are welcome modifications to the rules, in particular in relation to the inclusion of Japanese knotweed, which has been the subject of much lobbying from the industry.

Property Authorised Investment Funds (Property AIFs)

From 1 January 2009 the following changes will take effect:

• there will be an exemption from Stamp Duty Reserve Tax for Property AIF feeder funds, the intention being to prevent a double tax charge on a single economic transaction
• an administrative simplification for specialist feeder funds meaning that Property AIFs can, where requested, make net payments of property income and interest distributions to unit trusts rather than the current requirement to pay gross
• clarification of the treatment of manufactured payments representing distributions, bringing these in line with existing provisions for manufactured payments.

How this affects you

These measures are a welcome simplification to the operation of these vehicles.