The measure
UK REITs are qualifying groups or companies with property rental businesses that have elected to join the REITs regime. The benefit of being in the REIT regime is that profits and gains arising from the rental business are exempt from corporation tax. To qualify for the regime, the REIT is required to distribute 90 per cent of profits from its property rental business per accounting period to its shareholders. The change announced today will allow stock dividends to be issued in lieu of cash dividends to meet this distribution requirement.
Who will be affected?
UK property groups who have elected into the REITs regime.
When?
The legislation will be introduced in a Finance Bill as soon as possible in the next Parliament and will have effect for property income distributions made on or after the date the Bill receives Royal Assent.
Our view
This is a welcome change and one that has been lobbied for by UK REITs for some time given the desire to retain cash within their businesses.
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