Listing UK Real Estate Investment Trusts (REITs) On The International Stock Exchange (TISE)

• Published date: 29 May 2020
• Author: Mr Raulin Amy, Simon Felton, Niamh Lalor, Richard Daggett, Lucy Chambers and Emily Renouf
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Real Estate and Construction, Financial Services, Fund Management/ REITs, Commodities/Derivatives/Stock Exchanges, Corporate and Company Law, Real Estate, Trusts
• Law Firm: Ogier

UK real estate investment is considered by many to have a positive and significant track record of attracting investment flows as an alternative asset class for institutional investors such as pension funds, insurance companies, sovereign wealth funds and private equity for both UK-based investors and internationally.

UK REITs

A UK REIT is a real estate investment business that meets eligibility criteria set out by the UK tax authority, Her Majesty's Revenue and Customs (HMRC). These eligibility criteria include that:

• the property investment business be structured as a company (or group of companies) which is tax resident in the UK
• the principal purpose of the business is real estate investment (UK or international real estate) and specifically
  • at least 75% of the business's profits are derived from real estate rental income, and
  • at least 75% of the business's gross assets comprise cash or assets involved in real estate rental investment business.
• the company must not be a close company or must be a close company only because it has as a participator one or more 'institutional investors' (which includes, inter alia, a person acting on behalf of a limited partnership which is a collective investment scheme, UK or overseas pension schemes REITs, life insurance business, open-ended investment companies authorised unit trust schemes, certain charities or sovereign immunity investors)
• shares issued by the REIT must be either listed on or admitted to trading on a "recognised stock exchange" "recognised" by HMRC under the UK Income and Corporation Taxes Act 2007 (ICTA). This includes TISE as a recognised exchange.

Advantages to investors

Investment in a UK REIT provides investors with investment returns directly correlated to an investment return on the UK commercial or residential property rental market on a tax efficient, risk diversified, pooled investment basis.

Although a UK tax resident company, a UK REIT delivers an investment platform which the UK framework has made exempt from double taxation, i.e. it is effectively tax transparent for its investors so moves the point of taxation from the REIT to the investor.

A UK REIT is exempt from UK corporation tax on both the income profits and capital gains derived from the REIT's UK qualifying property rental business. Profits (income and gains) of the property rental business are exempted from tax, but distributions of those profits to investors as dividends are taxed in the hands of the investors.

UK...