Real Estate Investment Trusts Flashcards
What is a REIT?
It is a company that owns and in most cases operates income producing real estate
Tax Status and Structure of a REIT
Tax Exempt and Closed ended companies i.e. this cannot be an OEIC.
What is the main difference between a REIT and a PAIF?
A REIT is close ended and a PAIF is open ended
Basic Structure
Closed ended
The company must be based in the UK for tax purposes
The company can only list 1 class of ordinary share
They must be listed on a recognized stock exchange , which includes AIM
What are the two main elements of a REIT?
1) A ring fenced property letting business, which like a PAIF is exempt from corporation tax
2) The remaining non ring fenced business, which contains other activities e.g. property management services. Profits and gains from this element of the business are subject to Corporation Tax
Conditions to qualify as a REIT
1) At least 75% of the company’s total gross profit must be from the property rental business
2) At the beginning of each accountancy period, the value of the assets in the tax exempt part of the business must be at least 75% of the total value of the assets held by the company
3) REITS cannot have excessive amounts of debt financing.
