Shurgard Self Storage Ltd (the Company) is a UK Real Estate Investment Trust (UK REIT) effective since March 1, 2023. The conditions for joining and remaining in the UK REIT regime can be summarized as follows:
- The principal company of a group is a UK tax resident company with shares admitted to trading on a recognized stock exchange.
- A UK REIT must carry on a so-called “property rental business” in the UK and the proportion of the Shurgard Group’s profits and assets relating to property rental business should exceed 75% (under IFRS).
- The UK REIT should not be excessively leveraged (profit finance cost ratio).
In addition, as a UK REIT, the Company is required to distribute 90% of the profit from its UK property rental business (so called “PID”) to shareholders. The Company may also distribute taxed income from its non-UK operations or from its UK non-property rental known as a Non-Property Income Distribution, or “non-PID”.
Dividends can be entirely PID, entirely non-PID, or a combination of the two.
- PID dividends will be paid after deduction of withholding tax at the basic rate of tax, currently 20 per cent. For example, if a PID dividend equals €100, the Company will pay €20 to the UK tax authorities and €80 to the shareholder.
However, certain classes of shareholder may be able to receive PIDs gross, without deduction of tax. Such classes of shareholder include (might not be exhaustive) UK companies, charities, local authorities, UK registered Pension schemes and managers of PEPs, ISAs and Child Trust Funds. Overseas shareholders and individual private shareholders will not be eligible to claim exemption from deduction of withholding tax, but non-UK resident shareholders resident in countries which have a double tax treaty with the UK, may be able to obtain a partial refund of the tax withheld (please refer to your tax advisor).
- Non-PID dividends will not be subject to UK withholding taxes.
- Combination of PID and non-PID dividend: in this case, the Company will determine and disclose the amount of total dividend that relates to PID and withhold 20% withholding taxes on this proportion, while the non-PID component will be paid to the shareholder in full.
Under the UK REIT regime, in case such PID dividend distribution is made to so-called “Holder of Excessive Rights”, specific penalties apply. Broadly speaking, a holder of excessive rights is any corporate shareholder with a 10% or greater holding.
As a result, a UK REIT, being a normal UK tax resident company, is entitled to elect for a tax exemption that effectively turns UK taxable income and gains at company level into a taxable dividend.
Important note
Shurgard Self Storage Ltd does not provide tax advice. This summary has been prepared for information purposes only and is not intended to provide, and should not be relied on as tax advice. You should consult your own tax advisors.
