The Treasury has reiterated its stance against UK tax-transparent real estate investment trusts in the face of renewed pressure.
A spokesman said: “We remain to be persuaded. Research shared with the BPF has demonstrated there would be significant costs in setting up such vehicles.”
The French Senate is passing legislative changes to allow listed property companies to become REITs.
The move leaves the UK as the only G7 nations without tax-transparent property vehicles, and pressure on the government to follow suit has intensified.
The BPF recently condemned ministers for remaining oblivious to REITs in their pensions Green Paper.
It said the government was missing a major opportunity to give private investors greater choice and security in retirement planning by enabling them to invest directly in property.
BPF chief executive Liz Peace said: “The Green Paper comes at a time when the contrast between equity returns and those from commercial property could not be more marked, and yet the government continues to overlook the role property can play in creating a more balanced, less risky investment portfolio.”
The BPF said the present tax regime limited liquidity in UK commercial property, making it less attractive to pension funds.
“The present system has resulted in only sophisticated investors and high-net-worth individuals being able to invest directly in commercial property, through off-shore vehicles,” said BPF director Ian Fletcher.
Robert Wilkinson, group director of UBS Warburg real estate, said government obstinacy over REITs was also in part responsible for the surging housing market.
“If you had another more liquid and attractive means of getting hold of commercial property in the UK, the imbalance within that market wouldnt be there,” he argued.
Merrill Lynch (ML) recently said the UK property sector should horse-trade with the Treasury, paying part of its capital gains tax liability in exchange for the concession of REIT status.
ML has estimated the Treasury could gain a one-off payment of £1.4bn-£2bn if it agreed to sanction REITs.
EGi News 06/01/03
