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News

23rd March 2006

Brown Authorises REITs

In his 10th, and perhaps final, budget, Gordon Brown legislated for Real Estate Investment Trusts to be introduced into the UK from January 2007. Properrty company shares, including British Land and Land Securities soared on the announcement with over £3bn being added to the property sector of the FTSE.

The details of the announcement allow for more companies to be eligible for REIT status although no cpmanies have confirmed their intention to do so at this time.

The latest change is to clear the way for a company to only have to pay 2pc of its gross assets by way of a conversion charge if it converts to REIT status. This is far more attractive to the companies concerned than the much anticipated capital gains tax it was thought would be levied.

Other details include REITs will only have to hand back 90% (was 95%) of income, in return for being exempt from corporation or capital gains tax. They will also be able to carry more debt, with the gearing level increased from effectively 30pc to 80pc.

Full details of the legislation are expected in The Treasury's Finance Bill. This is due to be published in early April, with companies able to convert from 1st January 2007.