This summary of the REIT rules is a general overview only of the United Kingdom REIT rules and the implications for Land Securities Group PLC (Landsec) and its shareholders.

It should be regarded as neither comprehensive nor sufficient for making decisions, nor should it be used in place of professional tax advice. Land Securities Group PLC accepts no responsibility for any loss arising from any action taken or not taken by any person using this material.

Sales of shares by non-UK tax resident shareholders

From 6 April 2019 non-UK residents are subject to UK tax on gains arising from direct or indirect disposals of all types of UK land and interest in UK property rich entities.  All UK REITs, including Landsec, are classified as Collective Investment Vehicles (CIVs) for the purposes of these rules and as such the 25% de minimis exemption on indirect disposals of UK property rich companies does not apply.

HMRC’s draft guidance

Tax calculation

For shares held on or before 5 April 2019 shareholders have the option of using a tax base cost of;

• the value of the shares on 5 April 2019, or
• electing to use in the original base cost.

The value of Landsec shares at close of business on 5 April 2019 was £9.12.

For shares purchased after 5 April 2019 the tax base costs will be the actual costs.

Double Tax Treaty and other reliefs

Some tax-exempt investors may be exempt from UK capital gains tax, e.g. sovereign wealth funds and overseas pension schemes that meet specific criteria.  Shareholders should seek their own advice to determine if this applies to them.

Some non-UK residents may be able to claim relief from UK capital gains tax under the gains article in the relevant double tax treaty (depending on their jurisdiction of residence).  Shareholders should seek their own advice to whether this applies to them.

HMRC has electronic copies of all UK double tax treaties.

Reporting and payment deadlines

Where an investor makes a chargeable disposal, they must report this disposal and make a payment on account for any capital gains tax due to HMRC within 30 days. 

Sales of shares by UK tax resident shareholders

Gains realised by UK residents should continue to be reported and taxed in the same way.

UK tax base cost adjustments

There have been various events that could be relevant when computing a liability to capital gains tax and require an adjustment to the tax base cost for shares held at those dates:

1) Capitalisation issue (Land Securities PLC)– 30 November 1983

A resolution passed on 30 November 1983, £141,630,386 was capitalised from Reserves to pay up in full at par 141,630,386 unissued Ordinary Shares of £1 each.  These shares were distributed as fully paid to Shareholders in the proportion of two new Shares for every five Shares held on 18 November 1983.

As a consequence of the capitalisation the Issued Share Capital increased from 354,075,964 to 495,706,350 Ordinary Shares of £1 each fully paid.

The base cost of each share held immediately after the capitalisation will be 5/7 of the base cost of each share immediately prior to the capitalisation.

2) New holding company (Land Securities Group PLC) added – 6 September 2002

On 6 September 2002 Land Securities PLC was bought by a newly incorporated company, Land Securities Group PLC in consideration for it issuing of new shares in A and B shares in Land Securities Group PLC.

Based on the value of the new shares immediately after issue, the split of the base cost between the two share classes was;

• Ordinary A shares - 86.99%
• B shares - 13.01%

The number of Ordinary Shares in issue for Land Securities Group PLC immediately after was 12.5% lower than for Land Securities PLC immediately before.

Therefore, the tax base cost per share in Land Securities Group PLC will be 99.42% of the tax base cost per share of Land Securities PLC immediately before.  (86.99% / 87.5%).

3) Rights Issue - 24 March 2009

The rights issue allowed for five (5) shares to be purchased at an issue price of 270p for every eight (8) shares that were held. Note: If shareholders did not take part in the rights issue the tax base cost would remain the same.

To calculate the total tax base cost:

• Tax base cost of shares immediately before rights issue. Add to this;
• Number of share purchased in rights issue by 270p.
• Then divide by the total number of shares immediately after the rights issue.

Assuming participation and no fractions the tax base cost per share will increase to 112.49% of the base cost immediately before.

4) Return of Capital and share consolidation - 28 September 2017

On 28 September 2017 Land Securities Group PLC issued a B Share, valued at 60p, for each existing ordinary share in existence at that time.  These shares were immediately cancelled and 60p paid to shareholders.

At the same time there was a 15 for 16 share consolidation (so the metrics for Land Securities Group PLC would remain similar and comparable).

The allocation of base cost was

• Ordinary shares - 93.80%
• B shares - 6.20 %

The 15 for 16 share consolidation reduced the numbers of shares in issue by 6.25% (1/16th)

Therefore the tax base cost per share of the ordinary shares remaining after consolidation will be reduced to 99.95% of the tax base cost immediately before (93.75% / 93.80%).

Note: If there was a fractional share the calculation will be different. See example.

Value for shares held at 31 March 1982

For the purposes of UK taxation there was a rebasing of asset values on 31 March 1982.  Below is an example of the tax base cost of a share that has been held since that date.

Figures are rounded to the nearest penny for clarity.

The value (and tax base cost) of each share on 31 March 1982 was 287p.

i)    The value of each share in Land Securities PLC after the 30 November 1983 capitalisation issue was 205p per share (5/7 the of previous tax base cost).

ii)    The tax base cost of each new A share in Land Securities Group PLC after the 2002 insertion of the new holding company and share consolidation was 204p per share (99.42% of previous tax base cost).

iii)    The tax base cost after the 2009 rights issue (assuming participation and no fractions) was 229p per share (112.49% of previous tax base cost).

iv)    The value after the 2017 return of capital was 229p per share (204p if did not partake in the rights issue) (99.95% of previous tax base cost).