Property groups urge Treasury to make quick decisions on Reits

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The Independent Online

The British economy risks seeing property investment move offshore or go to other countries if it does not soon adopt the globally accepted standard for "real estate investment trusts" (Reits), the industry will warn the Treasury this week.

The British economy risks seeing property investment move offshore or go to other countries if it does not soon adopt the globally accepted standard for "real estate investment trusts" (Reits), the industry will warn the Treasury this week.

In a submission to be made to the Government, the British Property Federation (BPF) will ask that next year's Budget adopts the "exempt company" model for Reits that has been introduced in other countries, including France and the US. Reits reduce the tax payable by property companies.

The Treasury has said it wishes to introduce Reits in 2006 but is concerned that the move will lead to a fall in tax revenues under the straightforward tax exempt company structure. This would see tax levied on dividend payments only, whereas tax is currently levied on company profits and dividend payouts.

Ministers asked the property industry to address the tax point, especially in relation to taxing overseas investors. The submission is due by the end of this week.

The BPF, representing the property sector, said that its paper will argue that the Treasury's fears are overdone, although it conceded that there would be some initial tax loss. Liz Peace, chief executive of the BPF, said: "We have a marvellous opportunity to introduce a collective investment structure for commercial property that would bring significant benefits to the economy, open up investment opportunities to the man in the street and, provided we do not delay, establish London as the Reit centre of Europe."

She said that the quoted property sector in the UK would disappear if an attractive Reits structure was not offered. Ms Peace said she was aware of a number of companies ready to move offshore, if suitable Reits were not offered.

"We appreciate the concerns that the Government, and particularly the Inland Revenue have regarding initial tax loss but we are confident that this will be relatively small, can be mitigated by a range of measures and will, in any case, soon be overtaken by the enhanced investment activity that Reits will bring," Ms Peace said.

The BPF has examined the two main alternative structure for Reits - "the taxable company" model suggested by the Treasury, which would levy tax on property income but not on dividends, and also a "trust" structure possibility, but said it had decided that neither would meet the industry's needs.

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