Real Estate Investment Trusts (REITs): Unlocking the Potential of UK Property Investment
Introduction: Demystifying Real Estate Investment Trusts
When you hear the term “Real Estate Investment Trust” (REIT), you might envision a trust fund or a financial institution managing assets. However, in the United Kingdom, REITs are something entirely different. They are essentially UK property investment companies that enjoy specific exemptions from paying corporation tax on their rental profits and capital gains from UK property rental businesses. The term ‘trust’ can be misleading, as these entities are not trusts in the conventional sense.
The UK introduced the REIT regime in 2007, under the Finance Act 2006. This initiative aimed to stimulate investments in UK real estate and address the persistent issue of housing shortages. While REITs have been a well-established concept in the United States since 1960, the UK’s version has evolved over much less time.
The Appeal of UK REITs: HMRC-Approved and Sector Diverse
REITs are of particular interest to pension scheme investors as – providing the investment is made through a REIT – it allows them to invest in residential property in compliance with the tax legislation contained in the Finance Act 2004 and therefore not incurring 55% tax penalties from unauthorised payment charges.
Dividends from a REIT are received tax-free by registered pension schemes as they are tax-exempt.
