Schedule 17
Finance Bill
6:15 pm
Edward Balls (Economic Secretary, HM Treasury; Normanton, Labour)
I shall be brief because it is clear that the hon. Gentleman does not intend to raise detailed issues about the amendments. It is for you to make a judgment, Mr. Illsley, but from my point of view it would be fine if we range widely.
The clause that we have just agreed to introduces schedule 17, which amends provisions in part 4 of the Finance Act 2006. As the hon. Gentleman reminded us, we debated that set of clauses in great detail a year ago in a spirit of co-operation, and we made progress in mutual understanding of some of the issues.
The regime came into force on 1 January after some years of detailed and constructive consultation and engagement with the industry. By allowing indirect investment in property to enjoy the same tax treatment as direct investment, the UK REIT regime will improve the quality and quantity of finance for investment in property, promoting a wider range of savings products for individual investors and supporting structural change in property markets
I am pleased to say that the UK REIT regime is already proving a success with 13 companies converting to the regime from a wide variety of sectors, and now a 14th company setting up with the express purpose of being a UK REIT. The total market capitalisation of the UK REIT sector is now £35 billion, and two of the UK REITs include both commercial and residential property in their portfolios.
Since last year’s Finance Bill, we have continued our consultation with the industry to ensure that the regime works as effectively as possible. The changes in the schedule are the result of that consultation and were announced at the time of the pre-Budget report. As the hon. Gentleman suggested, they are minor changes clarifying some of the definitions and powers in the existing legislation.
We also announced at the time of the pre-Budget report that we would introduce changes to the regulations to extend the regime to make it easier for companies to become UK REITs, and the Chief Secretary circulated draft regulations for that purpose to Committee members on 9 May.
Since publication of the draft clause and schedule at the end of March, the Law Society has come forward with a further representation on the technical detail of the regime as it relates to demergers from UK REITs. Continuing that spirit of consultation, we are keen to accommodate those points, hence the amendments.
I am happy to respond to questions or requests for clarification, although I have the impression from remarks by the hon. Gentleman on the previous clause that he accepts that these are minor, technical drafting amendments.