The proposed tax regime for UK Real Estate Investment Trusts must be simplified if any UK REITS are to be launched at all, according to the ...

The proposed tax regime for UK Real Estate Investment Trusts must be simplified if any UK REITS are to be launched at all, according to the Association of Investment Trust Companies.

The AITC warns that unless the UK government makes the tax regime more attractive, investment managers will prefer to launch offshore property investment companies where there is already a thriving market.

REITS are already well established in the US and many parts of continental Europe, including France, Belgium, the Netherlands, and soon Germany. They are exempt from tax on rental income and capital gains as long as most of the REIT's income is distributed in dividends. These are then taxed at the taxpayer's own rate.

The AITC is particularly concerned about a condition that no person can control 10 per cent or more of the share capital or voting rights of a REIT, which it says will be "completely unworkable".

"We urge the government to rethink its position on the tax regime for REITs and to dramatically simplify the legislation otherwise there may well not be a single new UK-REIT launched," said Daniel Godfrey, director general of the AITC.

The association predicts that with a market for investment companies domiciled overseas with a listing in the UK already well established, it is likely that REITS will fail to get off the ground in the UK under the government's proposed framework.