UK to allow property investment trusts

The UK is to proceed with the introduction of real estate investment trusts (Reits) by the end of the year, according to property industry leaders.

Reits, a form of tax-transparent investment vehicle, are common in many countries, including the US and Australia, where they control hundreds of billions of dollars of assets.

If the British government proceeds with plans for a UK Reit it is expected that most of the country's listed property companies will convert.

Proposals were put forward in the March budget but there have been fears the move could be delayed because of the stumbling block over potential tax losses.

The British Property Federation warned in June that Reits could be put off until 2007.

But Phil Nicklin of Deloitte, one of the leading members of the industry panel negotiating with the Treasury, said it no longer looked as if the plans had been derailed.

"We have done a lot of work to convince the government that they will not lose a significant amount of tax. We are now hopeful there will be legislation in the pre-budget report and 2006 is looking realistic [ for the introduction]." The announcement could come in the pre-budget report, usually in November or early December. Reit legislation would then reach the statute books in the Finance Act of May 2006.

Mike Prew of Citigroup, one of the sector's leading analysts, said the introduction of Reits could quadruple the size of the UK-listed property sector, as many private companies were likely to return to the public arena and some overseas property companies might move their primary listings to London. Also, hotel, leisure, transport and industrial companies were expected to spin off some of their property.