ALISTAIR Darling yesterday announced that UK real estate investment trusts (Reits) will be allowed pay dividends in stock instead of cash.
The proposed legislation comes as a relief to a sector that has struggled to conserve cash during the downturn.
It will be introduced as soon as possible in the next Parliament, according to yesterday’s Budget.
Liz Peace, British Property Federation, chief executive, said: “Allowing Reits to have greater flexibility over how they manage their cash will benefit our economy as we begin to see improvements in occupier demand.”
The rules at the moment require Reits to pay 90 per cent of rental income in cash dividends, in return for exemption from corporate and capital gains tax.
But this requirement could lead to potential catastrophe given the current financial climate.
“Under the legislation if there is too big a take up by investors then it wouldn’t be possible to distribute enough income,” a spokesman for Land Securities said.
The move is likely to prove unpopular with income seeking investors.