Introduction to REITs

A real estate investment trust (REIT) is not a formal trust, but a company which qualifies for special tax treatment under CTA 2010, Pt 12.

REITs are similar to collective fund vehicles (such as unit trusts) in that they allow individual and corporate investors to pool their resources so as to provide them with opportunities, which might not have been open to them otherwise, to invest in commercial and residential property.

A simplified summary of REITs is set out below:

1. •

   a company notifies HMRC that it will become a REIT and that the qualifying conditions will be met

2. •

   tax is borne at the shareholder level, not the corporate level, as if shareholders had received the income or gains directly from the property

3. •

   property income distributions from REITs have income tax withheld at source by the REIT and are taxable on the shareholder as if they were profits of a UK property business. For this and the reason above, investors receive broadly