R03 REITs and property collectives: free practice questions
5 free questions on REITs and property collectives, part of learning outcome 2 (Taxation of investments). Pick an answer to check it, or open the answer to see why each option is right or wrong.
Question 1 of 5
How is a property income distribution from a REIT taxed for an individual investor in 2026/27?
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The answer is A: As property income, paid net of 20% tax
REIT distributions from the tax-exempt property business are property income paid net of 20% (reclaimable by non-taxpayers, gross within ISAs). Distributions from other profits are ordinary dividends. From April 2027, deduction will be at 22%.
Why the other options are wrong
B
It's property income paid net of 20%.
C
That's the treatment of the non-exempt element only.
D
It's taxable property income.
Question 2 of 5
Which of these are conditions for a company to keep REIT status?
1. At least 90% of rental profits distributed within 12 months
2. At least 75% of profits from property letting
3. Shares listed on a recognised exchange, which can include AIM
4. No borrowing of any kind
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The answer is B: 1, 2 and 3 only
REITs must be UK-resident, listed closed-ended companies (AIM counts), with at least 75% of profits from letting, interest cover of at least 125%, and at least 90% of rental profits paid out within 12 months.
Why the other options are wrong
A
Statement 1 is a condition; statement 4 isn't.
C
Borrowing is allowed if interest is covered at least 1.25 times by rental profits.
D
Listing (including AIM) is also a condition.
Question 3 of 5
Why might a property unit trust be more tax-efficient than a life company property fund for many investors?
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The answer is D: Gains are only taxed under CGT when the investor sells
Unit trusts, OEICs and investment trusts are subject to CGT only when the investor realises gains, using the annual exemption and CGT rates, unlike the chargeable event regime for life policies.
Why the other options are wrong
A
The advantage relates to the investor's CGT treatment.
B
Distributions are taxable.
C
They needn't be.
Question 4 of 5
How does investing in a listed property company differ from owning property directly?
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The answer is C: It's more liquid, but its share price is also driven by the stock market
Listed property shares give liquidity and diversification, but their prices reflect management, gearing and stock market sentiment, and tend to move more rapidly than the property market itself.
Why the other options are wrong
A
Property shares tend to move faster than the property market.
B
Gains on property shares are chargeable.
D
Companies hold many properties.
Question 5 of 5
Which feature distinguishes an insurance company property fund from a listed property company?
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The answer is B: It isn't geared, and unit values follow professional valuations
Life company property funds hold property directly, without borrowing, with unit values based on regular professional valuations. They're held through regular or single premium life policies.
Why the other options are wrong
A
That describes property company shares more.
C
It can be held through life policies.
D
Life fund returns are taxed under the policy rules.
Practise all 8 REITs and property collectives questions
These are 5 of the 8 questions on this topic in R0 Exam Prep, and the full R03 bank covers every learning outcome. Practise free, track your weak areas and sit timed mocks.
R0 Exam Prep is an independent revision tool. It is not produced, endorsed by or affiliated with the Chartered Insurance Institute (CII). Questions and explanations are original. Use it alongside the official study text. About R0 Exam Prep