Investment trusts: new rules

The UK Government is set to tighten up the rules for real estate investment trusts (REITs), to keep out property-rich businesses – such as pubs – which do not generate at least 75 per cent of their gross income from renting property out to third party tenants…

New legislation will appear in the Finance Bill 2009. This is apparently a response to structuring which might allow businesses who should not qualify for the exemption available to Reits to become one.

The Government has made it clear that it will consult with the industry on the changes to ensure that they do not create any unintended consequences for existing firms.

Peter Cosmetatos, British Property Federation (BPF) Director for Finance and Investment, said, "While we will of course have to consult our members about this announcement, it seems consistent with the original aims behind the introduction of Reits.

"Clearly, it will be critical that the way in which the Government legislates to tighten up the rules has no adverse impact on the existing Reits. Getting this wrong could damage the longer term prospects of the UK's Reit sector, which is coping with very challenging economic conditions as it is.

"We therefore welcome the statement of Government's intention to consult properly with the industry, and look forward to working with our members and with officials with a view to ensuring that these changes do not have any unintended adverse consequences," he added.

Source: British Property Federation