A new guide covering the tax treatment of real estate investment trusts has been published by KPMG and Reita.
Aimed at both advisers and private investors, the three-page note - available on the Reita website - the first guide on the tax benefits of Reits is designed to highlight the tax advantages of the investment compared with more traditional products.
Reita, the marketing and education organisation formed the providers of reits and quoted property groups, says the guide clearly shows how the net cash receipts from an investment vary dramatically according to the type of shareholder and the investment vehicle used.
For example, the guide suggests a shareholder investing in a reit through an Isa qualifies for net cash receipts of 100% of the Reit’s underlying profit before tax, compared to a higher-rate taxpayer investing directly in a quoted property company who would receive only 52.5% of the company’s profit before tax.
The guide also explains how Reits work, noting Reits are obliged to pay distributions to its holders equal to 90% of its exempt rental income, with each distribution known as property income distribution (pid), with the guide outlining how tax effects each pid.
Dave Butler, programme coordinator at Reita, says: “The tax transparency of Reits investment is very attractive when compared with other investment vehicles, but it is complex and we feel both advisers and private investors will benefit from this clear and simple guide.”
But he warns while tax should not be the first reason to choose an investment, the increasing popularity of property investment means the Reit tax advantages are good news for UK investors.
Charles Beer, head of real estate tax practice at consultants KPMG, adds: “We were delighted to be asked by Reita to produce this guide. And we hope it will help both professional advisers and private investors to understand the complexities surrounding the tax treatment of Reit distributions.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
Partner Insight: For Blackfinch, the arrival of its IHT portfolio services was a 'natural evolution' in the group's offering and points to an established track record of returning cash to investors.
Senior Managers Regime
Interest rate outlook unchaged
FCA made demands last week