REITS in the UK

International, United Kingdom Nicola Fritsch, John Prebble and Rebecca Prebble  Real Estate Investment Trusts in the United Kingdom This second in a series of four articles deals with the Real Estate Investment Trust (REIT) regime in the United Kingdom. A previous article considered the US REIT regime two subsequent ones examine REITS in Germany and compare the three regimes. 1. Introduction Real estate investment trusts (REITs) are entities that invest solely or primarily in real estate assets and have certain tax advantages that make them preferable to other forms of indirect real estate investment. The United States was the first country to create REITs,1 but a number of other countries have followed its example and created their own regimes. The United Kingdom was a comparative latecomer to REITs, as although the coun- trys real estate sector had been lobbying for a tax-privi- leged real estate investment entity for some time,2 the United Kingdom did not issue draft REIT legislation until December 2005. This development was met with pleasure and relief by the UK property industry. After an extended consultation period, the UK legislation creat- ing statutory REITs came into force on 1 January 2007. From that date, listed companies have been able to con- vert to REIT status and new REITs can be incorporated and listed. The central piece of legislation laying out the rules for UK-REITs3 is the Finance Act 2006. Part 4 and Schedules 16 and 17 of the Finance Act 2006 deal with REITs, and further rules are set out in Statutory Instruments 2006/2864 to 2867, known as the Regulations. In order to help the industry understand the new rules, HM Rev- enue Customs (HMRC) has issued guidance on real estate investment trusts, known as the Guidance,4 which sets out the legal framework provided for by the primary legislation under the Finance Act 2006. The property industry provided considerable input dur- ing the development stage of the UK REIT