Real estate investment trusts (REITs)

Produced by Tolley in association with Janet Paterson of Charter Tax
Real estate investment trusts (REITs)

The following Corporation Tax guidance note Produced 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
  • Qualifying groups
  • Conditions
  • Group tax treatment
  • Distributions
  • Non-UK members of the group
  • More...


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. Note that the rules for REITs can apply equally to single companies or groups of companies. A detailed discussion of the regime can be found in Simon’s Taxes, D7.1101 onwards.

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 Although the relevant manual paragraph was written before FA 2006, s 103 was repealed and rewritten into CTA 2010, s 518, it is still relevant.

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. 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.

Conditions which must be met by the REIT

To qualify as a REIT, a company must satisfy certain requirements. To remain a REIT, it must continue to meet these (and other) conditions because otherwise, unless the breaches are minor, transient and infrequent, it will be required to leave the regime.

The conditions are that the company:

  1. must be UK resident (and not dually resident in another jurisdiction, unless the

Popular documents