REITs, dividends and UK tax

Important note

This summary of tax consequences for shareholders is intended to provide only a general outline of the subjects covered. It should be regarded as neither comprehensive nor sufficient for making decisions, nor should it be used in place of professional tax advice. The British Land Company PLC accepts no responsibility for any loss arising from any action taken or not taken by any person using this material.

Dividends and our obligations as a REIT

As a Real Estate Investment Trust (REIT), British Land must follow certain rules relating to money it distributes to shareholders, and how those distributions are taxed. 90% of the tax-exempt profit from British Land's property rental business has to be distributed to shareholders. This is known as a Property Income Distribution, or 'PID'. British Land can also distribute taxed income from its other activities, known as a Non-Property Income Distribution, or 'non-PID'.

These distributions are commonly made by way of dividend payments. Dividends can be entirely PID, entirely non-PID, or a combination of the two; the Board will decide the most appropriate make-up on a dividend-by-dividend basis. Further, the PID/non-PID make-up of the Scrip Dividend Alternative may be different to that of the underlying cash dividend.

PID & non-PID dividend payments

Shareholders should note that the tax treatment of PID and non-PID dividends differs. PIDs are taxable as property letting income in the hands of tax-paying shareholders, but treated separately from any other property letting income which shareholders may receive.

  • Profits distributed as PID dividends are paid out of British Land's tax-exempt profits and therefore are potentially fully taxable in shareholders’ hands as property letting income. PID dividends are normally paid after deduction of withholding tax at the basic rate of income tax (20%), which the REIT pays to HMRC on behalf of the shareholder. Certain classes of shareholder are eligible to receive gross PID dividends. Examples of such classes are:
    • UK Companies
    • Charities
    • Local Authorities
    • UK Pension Schemes
    • Managers of PEPs, ISAs and Child Trust Funds
    Forms for claiming exemption from withholding tax on PID dividend payments are provided:
    REIT declaration - beneficial owner form PDF (0.02MB)
    REIT declaration - intermediary form PDF (0.02MB)
  • For UK resident individuals who receive tax returns, the PID from a UK REIT is included on the tax return as Other Income.

    If completing the return online, in the section "Other UK Income" tick the bottom box "Any other income". On the next page enter the total amount of the PID received (including tax) in "Other taxable income – before expenses and tax taken off", enter the tax deducted in "Tax taken off" and in the box for description of other taxable income state "PID from The British Land Company PLC".

    If completing a paper tax return, on page 3 enter the total amount of the PID received in box 17 and enter the amount of tax shown as deducted in box 19. In box 21, state that the Other Income is "PID from The British Land Company PLC". (Box references are to 2018 return).
  • The non-PID element of dividends will be treated in exactly the same way as dividends received from other non-REIT UK companies. The tax free Dividend Allowance (£5,000 for 2016/17) will apply to the non-PID element of dividends received by UK resident shareholders subject to UK income tax from 6 April 2016. It should be noted that this Allowance does not apply to the PID element of dividends.
  • For UK resident individuals who receive tax returns, any normal dividend paid by the UK REIT is included on the return as a dividend from a UK company. Your dividend voucher will show your shares in the company, the dividend rate, and the tax credit (for 2016 and prior) and dividend payable. Put the total dividend payments in box 4 on page 3 (Box references are to 2018 return) – do not add on the tax credit.

Sale of shares by UK and non-UK resident shareholders

From 6 April 2019 the gain on sale of British Land shares will be within the charge to UK tax for all shareholders, whether UK resident or non-UK resident, subject to possible tax treaty relief for non-UK residents or any exemption for tax exempt investors.

The gain for non-UK residents will be calculated by deducting the value at 5 April 2019 from the net sale proceeds, with the option to elect instead to deduct original cost. The value of British Land shares on 5 April 2019 was £5.984 per share.

Gains realised by non-UK resident individuals must generally be reported to HM Revenue & Customs within 30 days of the disposal.

Gains realised by UK residents should be reported on the tax return in the usual way.

Further details can be found on HM Revenue & Customs website here.

Reinvesting dividends

For shareholders who wish to re-invest their British Land dividends in the company, we offer a Scrip Dividend Scheme which enables shareholders to receive new Ordinary Shares in lieu of cash, for dividends where a Scrip Dividend Alternative is offered.