The Inland Revenue, the U.K. tax authority, published legislation last week clarifying a favorable tax treatment of property derivatives. The legislation is an amendment to the 2002 Finance Act, which has been eagerly awaited by potential market participants, who are already preparing deals in expectation of the ruling (DW, 7/30).
"There are plenty of deals in the wings," said Phil Nicklin, real estate tax partner at Deloitte in London. The amended legislation includes a paragraph on the tax treatment of total-return swaps on a property index, which Nicklin believes will be the most common property derivative. An example of a deal would be a swap in which one party pays a LIBOR spread and receives the returns of the Investment Property Databank index.