British Land removes billion pound tax bill

British Land wipes its £1.6bn deferred tax after converting to REIT status

Written by Kevin Reed

Accountancy Age, 13 Feb 2007

British Land's conversion into a REIT has boosted the company's net assets by £1.6bn after eliminating deferred tax.

'The translation of property performance to shareholder value in turn is substantially boosted without tax and via higher dividends,' stated chief executive Stephen Hester in his review of the company's quarterly performance.

'Breadth of investor interest in REITs, the strengthened competitive position of quoted REITs as the property vehicle of choice, both support the prospect of sustained stock valuation gains relative to history.'

However, the company posted a profit on ordinary activities before taxation of £381m for Q4 2006, compared with £617m a year earlier, due to goodwill impairment and refinancing charges. The total cost of converting to a REIT would be £338m, with a net upwards effect of £1.3bn on the company.

REITs are listed companies owning, managing and earning rental income from commercial or residential property, which distributes most of its income profits and in return should be exempt from corporation tax if the legislative conditions are met.