Who may be affected?
This measure affects UK real estate investment trusts (REIT), people investing in the UK REIT.
Summary of measures
This measure amends the tax rules applicable to: REITincludes several conditions that determine whether a company is certified. REIT.
policy goals
british rules REIT Introduced in the Finance Act 2006. Since 2006, the UK REIT has grown to around 130 companies, the real estate sector has evolved and the number of large institutional investors has increased. REIT has increased.
The aim of this measure is to modernize the regime, reduce certain constraints and administrative burdens, and increase the attractiveness of the United Kingdom. REIT Establish regimes for real estate investing and ensure regulations are in line with business practices.
Background of the measures
The government’s ‘Review of the UK’s funding system: Call for views’ was published on 26 January 2021, with a summary of responses published on 10 February 2022. As part of this wider review of the UK’s funding system, the Government considered further proposals.changes to REIT This scheme aims to reduce unnecessary burdens and make the scheme more attractive to investors in the UK. Some of these changes were made in the Finance Act 2022 and the Finance Act 2023 (No. 2). This measure brings forward the third part of the change.
Detailed suggestions
Working days
The changes will come into effect from the date of Royal Assent to the Finance Bill 2023, except as follows:
- Amendments to clarify that it is possible to track whether an institutional investor is the ultimate beneficial owner of shares through an intermediate holding company. REIT (Always treated as effective)
- Amendments to clarify the definition of real estate financing costs (treated as always in effect)
- Exclusion from the definition of certain amounts of real estate financing costs that are denied deduction for income tax purposes (effective from accounting periods ending on or after April 1, 2023)
current law
The current law is in Part 12 of the Corporation Tax Act 2010 (CTA 2010).
- the condition that REIT A company must not be an intimate company (including an exception to the rule that a company is intimate only because it has one or more institutional investors as participants) in Article 528.
- rules that allow REIT Holding a single commercial property is in Article 529
- Exemption from tax on the gain on disposal of REIT UK asset-rich company rights or interests in section 535A
- The profit to financing cost ratio is found in sections 543 and 544.
- The charges against the holder of excessive rights are found in Article 551, and the meaning of “holder of excessive rights” is found in Article 553.
- Regulations prohibiting insurance companies from owning more than 75% interest in an insurance company. REIT The group is located in section 606
Regarding changes to corporate profit restriction regulations REIT It is set out in section 452 of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010).
amendment
This measure amends the Corporation Tax Act 2010 as follows:
- Amends the definition of “institutional investor” in section 528(4A) to include authorized unit trusts, open-end investment companies (in each case including overseas equivalents) and limited entities in collective investment schemes. Requires partnerships to meet true ownership diversity conditions, or non-closing conditions — The amendments also require that those conducting long-term insurance business meet non-closing conditions to qualify as institutional investors. Required — transitional provisions apply and consequential changes apply to Articles 528ZA and 528ZB relating to the exception to Condition C of Article 528 (broadly, on recognized stock exchanges) (requirements for allowing transactions)
- Modifying the exception to the non-closing condition (which applies when a company is closed because it has one or more institutional investors as participants) and intermediary holding companies whose ultimate entity is an institutional investor Make it clear that it is traceable throughBeneficiary
- Amend section 528(4A) to add shared ownership licensed contracting schemes that meet a true diversified ownership condition or a non-close ownership condition to the list of entities that are considered institutional investors.
- Amends Condition C of Section 529 (applicable below). REIT (if you own a single commercial property), to ensure that the terms work as intended if there are changes to your property
- Extends the exemption under section 535A for gains on disposal of interests in UK high net worth companies to include profits realized on the disposal of interests in UK high net worth shared ownership recognized agreement schemes.
- Amend section 606 to allow insurance companies to hold a 75% or more interest in a UK group REIT
- Section 544(3) is amended to clarify that, in the profit-to-financing cost ratio, “property financing costs” means the financing costs referenceable to a UK property rental business; Insert clause (4A) to exclude it from financing costs.Definition of real estate financing: A fixed amount of expense that is denied deduction for corporate tax purposes.
- Amends Section 553 to prevent investors from becoming holders of excessive rights when distributions from related companies are taxed at specified rates or not at all. REIT Cases based on the conditions of a double taxation agreement, except where holding a certain size of interest is a condition. REIT
Additionally, the measures are:
- Article 452 of TIOPA 2010 is amended to include: REIT Exemption from disposal of rights or profits of UK asset-rich companies (section 535A of the Corporation Tax Act 2010). REIT Exemption from direct disposal of assets (Article 535 of the Corporation Tax Act 2010)
- Makes significant changes to the non-resident capital gains rules for collective investment vehicles included in Schedule 5AAA of the Taxation of Taxable Income Act 1992
Impact summary
Impact on the Treasury (in millions of pounds)
2023-2024 | 2024-2025 | 2025-2026 | 2026-2027 | 2027-2028 | 2028-2029 |
---|---|---|---|---|---|
can be ignored | can be ignored | can be ignored | can be ignored | can be ignored | can be ignored |
This measure is expected to have a negligible impact on the Treasury.
economic impact
This action is not expected to have a significant economic impact.
Impact on individuals, households and families
This measure only affects businesses and does not affect individuals.
impact of equality
No adverse effects are expected on groups that share protected characteristics.
Impact on business, including civil society organizations
This measure will have a negligible impact on the approximately 130 existing companies. REITinvestors of REITand any additional companies that may choose to become members of the UK. REIT.
Temporary costs for companies that are already experiencing economic growth REIT Structure includes familiarity with change. There are no ongoing costs planned for these operations.
The measures could also widen the range of companies allowed to enter the UK. REIT administration. One-time costs for these businesses may include understanding the changes and registering for the scheme. Ongoing costs are likely to include recording more information, performing more calculations and providing information to HMRC to comply with the regime.
This measure is expected to improve the overall experience of businesses dealing with HMRC, as it reduces certain constraints relevant to the UK. REIT We will improve the system and clarify and improve the operation of the law.This may allow you to invest REIT More attractive to some investors.
This measure is not expected to affect civil society organizations.
Operational impact (in millions of pounds) (HMRC or other)
The operational costs associated with this change are estimated at £2.04 million. These costs include changes to the IT systems used for reporting to support compliance monitoring through the countermeasures aspect, as well as minor labor costs.
Other effects
Other influences were considered, but none were identified.
Monitoring and evaluation
This measure will continue to be reviewed through ongoing communication with affected taxpayer organizations.
Further advice
If you have any questions about this change, please contact us below. REIT Email the policy team: financialservicesbai@hmrc.gov.uk