Important Note: As at 1 July 2016. This is a summary of the United Kingdom (“UK”) Real Estate Investment Trust (“REIT”) legislation and of certain tax consequences for shareholders. This summary is intended to provide only a general outline of the subjects covered and is restricted to certain UK tax consequences only. Regional REIT Limited accepts no responsibility for any inaccuracies contained herein. This summary should be regarded as neither comprehensive nor sufficient for making decisions, nor should it be used in place of independent professional investment and tax advice. Regional REIT Limited accepts no responsibility for any loss arising from any action taken or not taken by any person using this material.
REIT Dividends
UK REITs are required to comply with the statutory requirements relating to money distributed to shareholders, and how those distributions are taxed. 90% of the net income profits of its tax exempt business has to be distributed to shareholders, known as a Property Income Distribution (“PID”). REITs can also distribute taxed income from its other activities, known as a Non-Property Income Distribution (“non-PID”).
The tax treatment of PID and non-PID dividends differs. PIDs are taxable as UK property income in the hands of tax-paying shareholders, but treated separately from any other property letting income which a shareholder may receive. PID dividends are normally paid after deduction of withholding tax at the basic rate of income tax (20%), which the REIT pays to HMRC on behalf of the shareholder.
Certain types of shareholder can receive PID dividends gross: UK Companies; Charities; Local Authorities; UK Pension Schemes; and, Managers of PEPs, ISAs and Child Trust Funds.
Non-PID dividends are treated in exactly the same way by shareholders as ordinary dividends paid by UK (non-REIT) companies. From 6 April 2016 the notional 10 per cent tax credit has been abolished and replaced with a dividend allowance, which will apply to the ordinary, non-PID dividends received by UK resident shareholders who are subject to UK income tax. This allowance does not apply to the PID element of dividends.
The precise elements of each dividend payable will be clearly stated on the dividend vouchers or dividend confirmation as appropriate.