Real Estate Investment Trust (REIT) in the United Kingdom

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The United Kingdom (UK) also has real estate investment trusts, starting January 1, 2007. This is set out in Part 4 of the Finance Act 2006 (as updated by the Finance Act 2007).

New companies can get approved from the start and older companies can convert to UK-REIT status. They must notify HM Revenue & Customs (HMRC) before the beginning of the accounting period, but do not have to change their corporate structure. In fact, UK-REITs have to be corporations. The most basic requirement is that the company is in the property rental business. They are allowed to also conduct other businesses, which however are taxable.

They also must distribute at least 90% of exempted rental income to shareholders to avoid owing income taxes. These are known as Property Income Distributions (PID). In the UK these are taxable at the full marginal tax rate. A REIT may also pay normal dividends, at a schedule of its own choosing, within 12 months of the end of each accounting period.

UK-REITs must be solely resident in the UK for tax purposes. They cannot be an open ended investment company. They must be listed on a recognized stock exchange, including the Main Market of the London Stock Exchange, but not AIM.

Also, every REIT in the UK is required to make certain that its rental income is at least 125% of the amount of interest paid on debt. Companies changing to this business structure must pay a one-time tax to the government of 2% of their gross assets. And investments in property must constitute more than 75% of a company's assets.

They must have at least three separate buildings, commercial or residential, and their market value cannot exceed 40% of the total.

Their tax exempt profits must be at least 75% of their total profits.

When they develop property, it must be for investment purposes. They must hold it at least three years after completion of the development.

Groups of companies can make up a Group UK-REIT, including some with noncorporate structures. This can be a principle company along with all subsidiaries it owns 75% or more of. (Except not open ended investment companies and insurance companies.)

The European Public Real Estate Association -- trade association promoting the publicly listed real estate industry in Europe.

UK REITs Include:

Therefore, Real Estate Investment Trusts in the United Kingdom are a great way to profit from economic activity in the United Kingdom.

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