REITs on the Xmas agenda

There is increasing expectation that the Treasury's pre-Budget report is set to give the green light for legislation that will make conversion to REITs attractive to property developers.

Phil Nicklin, Deloitte tax partner and member of the government working party on real estate investment trusts, said: "As long as the government doesn't get cold feet then we should see an announcement in the pre-Budget report."

However commenting on the conversion tax, which is expected to be in the region of 4%, Nicklin believes that this figure would prove too high to make REITs attractive to property companies. A tax rate of as low as 2% is deemed more suitable by some industry experts, including Richard Quenby of Addleshaw Goddard, who believes that such a lower rate would stem the flow of offshore companies, particularly those defecting to Jersey and setting up Jersey-based property unit trusts (JPUTs).

Stamp duty revenue at an all-time high

The Treasury has confirmed that house buyers paid a record £5.5bn in stamp duty last year, which is an almost 50% increase compared to 2003. In fact according to the Treasury, the amount of stamp duty paid by homebuyers has risen eightfold during Labour's current reign, dating back to 1997, when stamp duty revenue only raised £675m.

A Treasury spokeswoman said: "No administration has ever linked tax thresholds to price movements of any particular asset. The practice of this government is no different."