Authorised property unit trusts were granted the same tax transparent status as REITs in today’s budget.
As revealed in last week’s Property Week, Chancellor Gordon Brown has changed the legislation following campaigning from trust managers and groups such as the Association of Real Estate Funds and the Investment Management Association.
The decision means that investment vehicles such as the New Star Property Unit Trust will now compete on the same level as REITs in the UK. Previously, funds paid 20% Corporation Tax on rental income and Stamp Duty Reserve Tax on the exchange of units within the fund.
Brown said that ‘following constructive discussions with industry, the government is announcing a framework for taking this issue forward, so that investors in Property Authorised Investment Funds face broadly the same tax treatment as they would have, had they owned real property or UK-REIT shares directly’.
Separately, the government said that corporation tax receipts from onshore companies are forecast to increase by 14% in 2007-08, benefiting from the one-off conversion charge for property firms converting to real estate investment trust status.