With the financial economy struggling and the FTSE dropping below 4,000, there is a demand from the British Property Federation to the Treasury to reform the Real Estate Investment Trust (REIT) regulations.
At present, the REITs which came into existence on January 1 2008, gives perks to landlords. Landlords are largely free of corporation tax but have to pay 90% of their rental income in dividends. The British Property Federation wants to change some things like deferring dividends or allowing them to be paid in stock. The BPF believes such changes could help in recovery and tempt new entrants to join the scheme.
Phil Nicklin, a real estate tax partner at Deloitte and an advisor on REIT to the Government says the conditions and rules of REIT were set during the property boom and cannot be considered as appropriate during a property price crash. The current property price crash has seen the value of capital fall by about 40 percent. To avoid a ‘breach of banking covenants’, some large REITs are approaching shareholders to raise more than £2 billion.
Changes like eliminating Stamp Duty Land Tax (SLDT) to the private rented sector have been asked to encourage residential REITs and attract more activity and investment in the residential sector.
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