Commercial Finance Specialists

Property campaigners are to contest the EU if it tries to impose a tax which would undermine the benefits of Real Estate Investment Trusts (REITs) and deplete property finance.

A number of bodies, including The British Property Federation (BPF), have united in hope that they can prevent the proposed financial transactions tax (FTT) from affecting Real Estate Investment Trusts and real estate funds. The tax would apply to a wide range of financial institutions, including alternative-investment funds, which has aroused industry concern.

To John Christian, Real Estate Tax Partner at Pinsent Masons, the proposed tax has been introduced as a tax on banks, but in fact disguises a broader impact. As such, "Applying the tax to real estate funds and managers does not affect banks but instead impacts investment yields to pension funds and other investors."

Real Estate Investment Trust expert Robert Moir expects the introduction of any such tax to strike at London disproportionately. "If it were to go ahead, the definition of what is and isn't a financial transaction subject to tax should be clarified", he said.

"As REITs are listed companies in the UK (LSE Main Market and, going forward, AIM) the UK Government will presumably look to ensure REITs are excluded from the scope of the tax, especially as it is trying to encourage them."

Last week, David Cameron attempted to dissuade Angela Merkel from supporting the imposition of the so-called ‘Tobin Tax’ across Europe, stating that British financial institutions already bear enough of the burden.

"In Britain also we have put in place stamp duty on share transactions, a bank levy. We believe we are asking the financial services to make a fair and proper contribution to rebuilding our economy, to bring down our debts and our deficits. I think it is right in all countries to make sure that they do that."