Scottish Widows Investment Partnership has commented on the governments forthcoming draft legislation on Real Estate Investment Trusts.
It believes REITs will provide a stable savings product that is accessible to private investors for savings and pension investment, especially if introduced as ISA, PEP and CTF eligible.
The draft legislation will present the UK with a window of opportunity to become the leading centre for REITs in Europe, with its mature property market and pool of experienced managers and firms.
Ian Hally, head of property research at SWIP, says: “We anticipate a REIT structure will be an attractive vehicle for property investment management in the UK and look forward to the government’s announcement on the conversion charges.
“Reputation for sound financial regulation and the strength and liquidity of London’s listed markets makes the UK an attractive location for both domestic and foreign investors.”
SWIP also welcomes the tax benefits that the draft legislation outlines and, if introduced, will help make REITs a tax efficient way for investors to access the direct property market.
It is expected the draft legislation will mean REIT companies are able to pass on their rental income collected to the investor as a dividend, free of tax. The investor then pays tax on the dividend received in the normal way avoiding double taxation.
The government has outlined that REITs will be required to distribute at least 95% of their net taxable profits to investors. SWIP welcomes this proposal as it is expected this will lead to higher dividends paid out as companies convert to REIT status.