The REIT is widely regarded as the UK government’s flagship property investment regime. Introduced on 1 January 2007, REITs were created to provide investors with a tax-efficient way of gaining exposure to commercial property and encourage investment into UK real estate. 

A UK REIT is a listed closed-ended company, which owns and manages commercial and/or residential property on behalf of its shareholders.

What are the benefits of being a UK-REIT?

  • UK REITs well recognised by investors leading to attractive vehicle for raising capital.
  • Common vehicle used for tax exempt investors such as Sovereign Wealth Funds.
  • Property rental profits and gains are tax exempt.
  • Distributions to investors are required to pay withholding tax at 20% however, UK resident company, pension schemes or investors with sovereign immunity can reclaim.
  • Any profits and gains not derived from property rental activities taxed in the usual manner under the Corporation tax regime.

The UK Government confirmed it would introduce a series of changes to reform the REIT which were of particular benefit to institutional investors effective 1 April 2022. 

What are the benefits of these changes? 

  • Listing requirement where institutional investors hold at least 70% of ordinary share capital of the REIT removed.
  • The definition of an overseas equivalent of a UK REIT has been changed from the overseas entity being a resident of a jurisdiction that has a law equivalent to the UK’s REIT regime to the overseas entity itself being equivalent to a UK REIT in terms of its characteristics.
  • A ‘gateway test’ in the form of a new simplified balance of business test is introduced so that, if a group’s consolidated accounts for a period show that property rental business profits and assets comprise at least 80 percent of group totals, a REIT will not have to prepare the additional statements which would be required to meet the full test.
  • The ‘holder of excessive rights’ charge is to be removed in respect of investors to whom property income distributions can be paid gross under the UK’s domestic REIT withholding tax rules. 

How LGL can assist? 

Jersey provides the ideal vehicle for institutional investors and fund managers to structure their property investment into the UK. 

  • Many UK REITs are Jersey companies. 
  • Jersey provides a flexible corporate and regulatory environment
  • Jersey is a tax-neutral jurisdiction.
  • Jersey offers significant expertise across the service model. 

We have a proven track record with REITs that are listed and have been engaged on various Private REITs since its introduction on 1st April 2022.  Our highly experienced team administer the structures alongside our directors who sit on multiple REIT boards. 

Connect with Giovanni Fumagalli, Associate Director, Real Estate