The government late last night put new legislation in front of parliament relaxing its restrictions on individuals owning more than 10% of a REIT.

An additional tax charge on a REIT will be levied where a shareholder with a stake of 10% or more in the REIT is a company, however, or owned through a SIP.

The guidance is good news for companies with large individual ownerships or where family trusts hold a large stake such as Liberty International, London Merchant Securities and CLS Holdings.

The previous rule existed to prevent tax loss through double-tax treaties, where withholding tax charged on dividends can be clawed back by overseas investors.

A Treasury spokesman said: ‘Following consultation on draft regulations we concluded that in order to protect the Exchequer, the rule need only apply to corporate shareholders.

‘The listing requirement and close company rules (that the company cannot be controlled by five or fewer shareholders) will ensure the government's objectives for wide ownership of REITs are met.’

The original legislation on the long-awaited tax-efficient property vehicles, due to be launched in January 2007, was published in the Finance Act in July.