Chancellor of the Exchequer Gordon Brown is expected to release details of how new US-style tax efficient property trusts will be structured when the 2005 budget is announced later this month, according to a report in the Times.
Following a consultation with the main representative bodies of the property industry in April 2004, it was widely anticipated that the launch of the new vehicles would take place this year.
However, the Treasury has since decided to modify its initial proposals, which will require a second period of consultation. The new proposals are thought to mirror more closely the recommendations of the property industry. It is expected that the trusts will be introduced sometime during 2006.
The new property funds are likely to be modelled on American real estate investment trusts (Reits), which are exempt from tax on rental income and capital gains, and pay tax on distributed dividends at the taxpayer's own rate.
“This is the holy grail of the UK property industry and makes huge economic sense,” remarked Mike Prew, a Citigroup property analysts, according to the Times report.
“It generates a windfall tax for the chancellor, creates a retail property savings product and makes the UK commercial property market more flexible and efficient,” he observed.
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