Chancellor Alistair Darling will deliver his 2008 Pre-Budget Report on Monday.  Phil Nicklin, real estate tax partner at Deloitte, is hoping he will address a number of issues that are important to the real estate industry: 

Residential REITs
Improving the Real Estate Investment Trust (REIT) regime to facilitate residential REITs by, for example:

• Introducing unlisted REITs or AIM-traded REITs.  This would reduce the cost of becoming a REIT (which currently needs to be listed) and would recognise that it is difficult to list in the current climate.
• Changing the diverse ownership test which would be particularly relevant to unlisted residential REITs, which are likely to be owned by a small number of large investors.
• Reducing the entry charge for newly-formed REITs as they don’t benefit from elimination of historic capital gains, unlike established companies that convert to REIT status.
• Amending the REIT regime to accommodate residential REITs. The residential business model has particular characteristics that do not suit the current REIT regime (e.g. the need to ‘churn’ properties).
• Mitigating the stamp duty cost of assembling residential portfolios. Currently the rate of stamp duty is determined by the price paid for the whole portfolio, rather than the price of each individual property (which might enjoy a lower rate of stamp duty).

Empty Property Rate Relief
The changes to the empty property rate relief which came into effect on 1 April 2008 were intended to prevent property standing empty and to stabilize rent.  However, the costs are proving to be prohibitive for many property groups in the current economic.  We hope the PBR will include:

• A review of empty property rate relief, potentially to revert to the regime that existed before 1 April 2008 which gave a partial relief for shops and offices and a full relief for industrial premises.

End

Notes to editors
Phil Nicklin, real estate tax partner at Deloitte, leads the Treasury-appointed technical group on REITs. 

To speak to Phil Nicklin or another of Deloitte’s tax experts ahead of the Pre-Budget Report, please call Celine Gordine-Wright on 020 7007 6384.

From 3pm on Monday 24 November, please call the Deloitte PBR Press Hotline on 020 7007 3333, where you will be directly connected to one of our spokespeople:

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP, which is among the country's leading professional services firms.  Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein, whose member firms are legally separate and independent entities.  Please see www.deloitte.co.uk\about for a detailed description of the legal structure of DTT and its member firms.  The information contained in this press release is correct at the time of going to press.