Punch Taverns, Britain's largest pub group, has reached a compromise with HM Revenue & Customs (HMRC) that would see it convert into a real estate investment trust (REIT) while retaining ownership of all its businesses, including managed division Spirit.
The company has revealed it will submit a clearance application to HMRC in the near future but only once it had completed an evaluation the feasibility of the tax efficient structure given its current operating and financing arrangements.
Punch said that the benefits of retaining its 863 strong managed Spirit business were clear as you could retain operational synergies, maintain strategic flexibility and capture any upturn in the market.
Were Punch to convert into a REIT it would follow in the steps of its managed house rival Mitchells & Butlers and its tenanted and leased rival Enterprise Inns, who are both pursuing conversions into the corporation tax free investment structure.
The pub owner and operator, which owns 8,431 pubs said that its sales in the nine months to 21 June had fallen by 3.4% in its leased business and by 3.6% in its managed business.
However Punch admitted that the past two weeks had seen an improvement, given the warmer weather conditions.
Giles Thorley, chief executive of Punch Taverns said: "Punch remains extremely robust from both an operational and financing perspective, despite the challenging consumer environment.
"We continue to be confident of meeting the market's full year profit expectations as well as continued value creation over the medium and long term."
By Christopher Walton
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