UK real estate investment trust (UK REIT) meaning

Direct tax treatment of UK companies investing in UK land While purchasers may have grounds to hold commercial and, at times, residential property through an offshore structure, the UK limited company is still the predominant vehicle for investing in UK real estate. An important exception is privately used dwellings, for which a UK company is generally not a tax-efficient holder. This is a consequence of the April 2013 introduction of the annual tax on enveloped dwellings (ATED) and associated measures, alongside the Single higher rate of SDLT for high-value residential transactions. ATED now extends to dwellings valued above £500,000, subject to a number of reliefs. For more information, see the Practice Notes: ATED—the basics and Single higher rate of SDLT for high-value residential property transactions. This Practice Note sets out the direct tax (that is, corporation tax) position of a UK-incorporated and tax-resident company (referred to here as a UK company) investing in or dealing with UK land...

This Practice Note considers the circumstances in which a UK real estate investment trust (REIT, described in the tax legislation as a UK REIT) holds property indirectly through a structure such as a partnership, offshore unit trust or company. It then turns to the scenario where a REIT participates in property via a joint venture company (or a group of companies). For an overall summary of the REIT regime, see Practice Note: REITs—summary of the tax regime. Other specific aspects of the regime are explored in greater depth in the following Practice Notes: REITs—the conditions and tests REITs—tax treatment of the REIT and its shareholders REITs—breaches and exit Indirect ownership of property REITs may hold non-direct interests in property via vehicles including partnerships, offshore unit trusts or companies. The tax analysis for a REIT of such indirect holdings hinges on the legal character of the relevant vehicle. A helpful table summarising the treatment for different categories of entity is provided...

Practice Note: REITs—the conditions and tests To fall within the UK real estate investment trust (REIT) tax regime, a company—or a group—must meet a range of requirements in each accounting period. These comprise: criteria concerning the REIT’s own status and behaviour (or, for a group REIT, those of the group’s principal company), and more granular rules about the REIT’s balance of business and various other matters These conditions are set out in detail in Practice Note: REITs—the conditions and tests. This Practice Note also explains what occurs when any of these requirements are not met. It further addresses: the tax implications of leaving the REIT regime, and the ways an exit can be carried out, including by giving notice For an overall overview of the UK REIT regime, see Practice Note: REITs—summary of the tax regime...