Real estate investment trusts (REITs)

By Tolley in association with Janet Paterson of Charter Tax

The following Corporation Tax guidance note by Tolley in association with Janet Paterson of Charter Tax provides comprehensive and up to date tax information covering:

  • Real estate investment trusts (REITs)
  • Introduction
  • Conditions which must be met by the REIT
  • Entry and exit to the REIT regime
  • Group UK REITs
  • Tax position of individual investors


A real estate investment trust (REIT) is in fact not a trust at all; it is a company which qualifies for special tax treatment under CTA 2010, Part 12. REITs were introduced with effect from 1 January 2007.

Note that the rules for REITs can apply equally to single companies or groups of companies.

HMRC views the introduction to the REITs legislation as permitting a purposive interpretation in the event that any of the wording of the legislation is not clear. Although the relevant manual paragraph was written before FA 2006, s 103 was repealed and rewritten into CTA 2010, s 518, it is still relevant to the new legislation.


The point of a REIT is that it can enjoy exemption from corporation tax on its property rental business, and also on any gains from disposals of properties that form part of that property business. Dividends from REITs have basic rate income tax withheld at source by the REIT and are taxable on the shareholder as if they were profits of a UK property business. However, if a shareholder decides to sell his shares in the REIT, these are taxed in accordance with the normal rules for share disposals, see the Shares guidance note (subscription sensitive). The shareholders’ tax position is discussed further at the end of this guidance note.

In order to manage the application of the corporation tax exemption, the legislation ring-fences the qualifying property income generating activity. This means that the ring-fenced income is exempt and all income outside of that ring-fence is taxable in the normal way.

Please note that at the time of writing, the HMRC manuals have not been updated to reflect the rewrite of the legislation into CTA 2010 (subscription sensitive), let alone any changes since then. However, most of the HMRC guidance is still correct and remains

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