Hammerson, the property group, will pay the Treasury £96m when it converts at the start of next year to a tax-efficient Reit structure.
The company was the first major property operator to declare it will become a Reit (real estate investment trust) and yesterday it said the group was on course to do so at the earliest possible date, 1 January 2007.
Reits, a new structure for property businesses, are exempt from income and capital gains taxes, but they must pay out almost all profits as dividends to shareholders - which are taxed - and pay a conversion charge.
Reporting half-year results yesterday, Hammerson said that, on the basis of its portfolio's current valuation, the charge that would be levied, if it were allowed to convert right now, would be £96m. It is unlikely to be much different in January. But that would save £410m of capital gains tax were the company to sell off its UK properties.
John Richards, the chief executive, said that the company hoped to make a good return on the one-off conversion charge, which is levied at a rate of 2 per cent of the value of the property going into a Reit.
"I am confident that we will make a suitable return [on the charge]. Fifteen per cent is the target. That's what we plan to deliver," Mr Richards said.
He said in France, where the company's properties have been in a Reit structure for the past three years, Hammerson had achieved returns of some 20 per cent.
Hammerson reported a 12.3 per cent gain in the net asset value (NAV) of its offices and retail properties in the six months to end-June and said it was confident of further growth in rental income.
"We made good progress in letting space within the office portfolio and maintaining high occupancy levels at our retail scheme ... Momentum has been maintained since end-June," Hammerson said.
Adjusted pre-tax profit for the first six months rose 5 per cent to £44.8m. The interim dividend of 6.38p a share is up 10 per cent.Reuse content