512 Securities which are approved charitable investments
(1) The investments to which this section applies are investments in securities—
(a) issued or guaranteed by Her Majesty’s Government in the United Kingdom or by the government of a member State of the European Union,
(b) issued or guaranteed by the government or a governmental body of any territory or part of a territory,
(c) issued by an international entity listed in the Annex to Council Directive 2003/48/EC (directive on taxation of interest payments),
(d) issued by an entity meeting the four criteria set out at the end of that Annex,
(e) issued by a building society,
(f) issued by a credit institution which operates on mutual principles and which is authorised by an appropriate governmental body in the territory in which the securities are issued,
(g) issued by an open-ended investment company,
(h) issued by a company and listed on a recognised stock exchange, or
(i) issued by a company but not listed on a recognised stock exchange.
(2) Subsection (1) is subject to section 513.
(3) In this section and in section 513—
“debentures” includes—
debenture stock and bonds (whether constituting a charge on assets or not), and
loan stock or notes,
“open-ended investment company” is to be read in accordance with sections 613 and 615,
“securities” includes shares and debentures, and
“shares” includes stocks.
(1) Section 512 does not apply to an investment by virtue of subsection (1)(b), (c) or (d) of that section unless—
(a) condition A is met in relation to the securities, and
(b) if the securities are shares or debenture stock, condition B is met in relation to the securities.
But see subsection (3) of this section.
(2) In the case of an investment in securities issued by a company which is incorporated, section 512 does not apply to the investment by virtue of subsection (1)(i) of that section unless—
(a) condition A is met in relation to the securities,
(b) if the securities are shares or debenture stock, condition B is met in relation to the securities, and
(c) condition C is met in relation to the company.
But see subsection (3) of this section.
(3) Conditions A and B need not be met if the securities are traded or quoted on a money market supervised by the government or a governmental body of any territory or part of a territory.
(4) Condition A is that the securities are traded or quoted on—
(a) a recognised investment exchange (as defined in section 285(1) of FISMA 2000), or
(b) an investment exchange which constitutes the principal or only market established in a territory on which securities admitted to official listing are dealt in or traded.
(5) Condition B is that—
(a) the securities are fully paid up,
(b) the terms of the issue of the securities require them to be fully paid up within the period of 9 months beginning with the day after the day on which they are issued, or
(c) the securities are shares issued with no nominal value.
(6) Condition C is that—
(a) throughout the last business day before the investment day, the company has total issued and paid up share capital of at least £1,000,000 (or the equivalent of £1,000,000 in some other currency), and
(b) in each of the 5 years immediately before the calendar year in which the investment day falls, the company paid a dividend on all the shares issued by the company (excluding any shares issued after the dividend was declared and any shares which by their terms of issue did not rank for dividend for that year).
(7) For the purposes of the words in brackets in subsection (6)(a) use the exchange rate prevailing in the United Kingdom at the close of business on the last business day before the investment day.
(8) For the purposes of subsection (6)(b) a company formed—
(a) to take over the business of another company or other companies, or
(b) to acquire the securities of, or control of, another company or other companies,
is treated as having paid a dividend in any year in which a dividend has been paid by the other company or all of the other companies (as the case may be).
(9) It is irrelevant that the company is formed for other purposes in addition to those mentioned in paragraph (a) or (b) of subsection (8).
(10) In this section—
“business day” means, in relation to an investment, a business day in the place where the investment is made, and
“the investment day” means, in relation to an investment, the day on which the investment is made.
(1) A loan is an approved charitable loan for the purposes of section 496 (meaning of “non-charitable expenditure”) if it meets conditions A and B.
(2) Condition A is that the loan is not made by way of investment.
(3) Condition B is that either—
(a) the loan is made to another charity for charitable purposes only,
(b) it is made to a beneficiary of the charitable company in the course of carrying out the purposes of the charitable company,
(c) it consists of money placed on current account with a bank otherwise than as part of an arrangement under which a loan is made by a bank to some other person, or
(d) an officer of Revenue and Customs is satisfied, on a claim, that the loan is made for the benefit of the charitable company and not for the avoidance of tax (whether by the charitable company or by some other person).
(4) In this section “bank” has the meaning given by section 1120.
515 Excess expenditure treated as non-charitable expenditure of earlier periods
(1) This section applies if a charitable company's non-charitable expenditure for an accounting period exceeds its available income and gains for the period.
(2) The excess is the charitable company's “excess expenditure” for the accounting period.
(3) The charitable company's excess expenditure for the accounting period is treated for the purposes of this Part as non-charitable expenditure for earlier accounting periods so far as it can be attributed to earlier accounting periods under section 516.
(4) For the purposes of this Part a charitable company's “available income and gains” for an accounting period is the sum of—
(a) the amount in respect of which the charitable company is chargeable for the period under the charge to corporation tax on income after giving effect to any exemption under this Part,
(b) any chargeable gains accruing to the charitable company in the period,
(c) the charitable company's attributable income and gains for the period (see section 493), and
(d) any non-taxable sums received by the charitable company in the period.
(5) In subsection (4) “non-taxable sums” means donations ... and other sums of a similar nature which, ignoring exemptions from corporation tax under this Part and under section 256 of TCGA 1992, are not liable to corporation tax.
(6) Any restrictions on the exemptions under this Part which result from sections 492(2) and 494 are to be ignored in calculating the amount mentioned in subsection (4)(a).
(7) Any restriction on the exemption under section 256(1) of TCGA 1992 which results from section 256(4) of that Act is to be ignored in calculating the amount of any chargeable gains to be taken into account in accordance with subsection (4)(b).
516 Rules for attributing excess expenditure to earlier periods
(1) The rules in this section apply for attributing a charitable company's excess expenditure for an accounting period to earlier accounting periods under section 515.
(2) The excess expenditure for an accounting period may be attributed to an earlier accounting period if—
(a) the earlier period ends not more than 6 years before the end of the period in question, and
(b) the charitable company's available income and gains for the earlier period exceed its non-charitable expenditure for the earlier period.
(3) If the conditions in subsection (2) are met in the case of more than one earlier accounting period, the excess expenditure is to be attributed to a later accounting period in priority to an earlier accounting period.
(4) The amount of excess expenditure that is to be attributed to an earlier accounting period must not be greater than the amount by which the charitable company's available income and gains for the earlier period exceed its non-charitable expenditure for the earlier period.
(5) For the purposes of subsections (2)(b) and (4) the charitable company's non-charitable expenditure for the earlier accounting period includes any excess expenditure attributed to the earlier period as a result of a previous operation of this section, but ignores the attribution in question.
(1) This Part—
(a) enables a group of companies which carries on property rental business and which meets requirements specified in Chapter 2 to opt to benefit from exemptions from corporation tax on profits and gains in accordance with Chapter 3, and
(b) imposes liabilities to tax on members of the group and the recipients of distributions made by the principal company of the group.
(2) This Part makes corresponding provision in relation to a company which carries on property rental business and which meets requirements specified in Chapter 2.
(3) In addition—
(a) Chapter 4 deals with some of the consequences of becoming, or becoming a member of, a UK REIT,
(b) Chapters 5, 6 and 7 contain provision relating to (respectively) assets of, distributions made by, and gains arising to a UK REIT,
(c) Chapter 8 contains provision about failure to meet requirements specified in Chapter 2,
(d) Chapter 9 contains provision about ceasing to be, or to be a member of, a UK REIT,
(e) Chapter 10 provides for the application of this Part in relation to property rental business carried on by way of a joint venture, and
(f) Chapter 11 contains miscellaneous provision and definitions.
(4) In this Part “UK REIT” means—
(a) a group UK REIT (see section 523(5)), or
(b) a company UK REIT (see section 524(5)).
(1) In this Part “property rental business” means—
(a) UK property business (within the meaning given by section 205 of CTA 2009), and
(b) overseas property business (within the meaning given by section 206 of that Act).
(2) For the purposes of subsection (1) ignore the effect of section 42(2) of CTA 2009 (which provides for receipts and expenses in connection with tied premises to be treated as part of a trade and not as part of a property business).
(3) The definition of “property rental business” is subject to—
(a) section 598(3) (which provides that certain lettings of property by a joint venture company or a member of a joint venture group are not property rental business),
(b) section 604 (which provides that business of a specified class is not property rental business), and
(c) section 605 (which provides that business giving rise to income of a specified class is not property rental business).
(4) Business carried on by a non-UK company which is a member of a group is property rental business for the purposes of this Part if the business would be property rental business if carried on by a UK company.
520 “UK property rental business” of non-UK companies
(1) In this Part references to “UK property rental business”, in relation to a non-UK company, are to the company's property rental business in the United Kingdom.
(2) Subsection (3) applies if—
(a) a non-UK company which is a member of a group UK REIT has UK property rental business, and
(b) the profits of that business would be chargeable to income tax under Chapter 3 of Part 3 of ITTOIA 2005.
(3) Profits of the UK property rental business—
(a) are to be treated for the purposes of this Part as if they were (subject to the application of this Part) chargeable to corporation tax, and
(b) are not to be charged to income tax.
(1) In this Part “UK company” means a company which is—
(a) UK resident, and
(b) not resident in another place in accordance with the law of that place relating to taxation.
(2) References in this Part to a “non-UK company”, in the case of a group of companies, are to be read in accordance with subsection (1) (and references in such a case to a company which is a “UK member” or “non-UK member” of the group are to be read accordingly).
523 Notice for a group of companies to become a UK REIT
(1) A group of companies becomes a group UK REIT if the principal company of the group gives a notice under this section.
(2) A notice under this section is a notice specifying a date from which the group is to be a UK REIT.
(3) The principal company of a group may only give a notice under this section if—
(a) it is a UK company, and
(b) section 236 of FISMA 2000 (open-ended investment companies) does not apply to it.
(4) If the principal company of a group gives a notice under this section, the group is a UK REIT from the date specified in the notice.
(5) In this Part “group UK REIT” means a group of companies the principal company of which has given a notice under this section.
(6) This section is subject to section 527(2) (requirements to be a group UK REIT).
(1) A company becomes a company UK REIT if it gives a notice under this section.
(2) A notice under this section is a notice specifying a date from which the company is to be a UK REIT.
(3) A company may only give a notice under this section if—
(a) it is a UK company, and
(b) section 236 of FISMA 2000 (open-ended investment companies) does not apply to it.
(4) If a company gives a notice under this section, the company is a UK REIT from the date specified in the notice.
(5) In this Part “company UK REIT” means a company which has given a notice under this section.
(6) This section is subject to section 527(3) (requirements to be a company UK REIT).
525 Notice under section 523 or 524: supplementary
(1) A notice under section 523 or 524—
(a) must be given in writing to an officer of Revenue and Customs,
(b) must be given before the date specified in the notice,
(c) must be accompanied by a statement by the company giving the notice that each of conditions A, B, C, E and F in section 528 (conditions for company) is reasonably expected to be met in relation to the company throughout accounting period 1, and
(d) must contain such other information, and be accompanied by such other documents, as may be prescribed by regulations made by the Commissioners for Her Majesty's Revenue and Customs.
(2) Subsection (3) applies if the company giving the notice—
(a) does not expect to meet condition C in section 528 on the first day of accounting period 1, but
(b) reasonably expects to meet that condition throughout the rest of accounting period 1.
(3) If this subsection applies—
(a) subsection (1)(c) does not apply, but
(b) the notice must be accompanied by a statement by the company containing the assertions specified in subsection (4).
(4) Those assertions are—
(a) that conditions A, B, ... E and F in section 528 are reasonably expected to be met in relation to the company throughout accounting period 1, and
(b) that condition C in that section is reasonably expected to be met in relation to the company for at least a part of the first day of accounting period 1, and throughout the remainder of the period.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) For the meaning of “accounting period 1”, see section 609.
Once a group or a company becomes a UK REIT, the group or company continues to be a UK REIT until it ceases to be a UK REIT in accordance with section 571, 572 or 578.
527 Being a UK REIT in relation to an accounting period
(1) This section sets out the requirements that must be met if a group or company is to be a UK REIT in relation to an accounting period.
(2) In order for a group of companies in respect of which a notice has been given under section 523 to be a group UK REIT in relation to an accounting period—
(a) each of the conditions in section 528 (conditions for company) must be met in relation to the principal company throughout the accounting period,
(aa) the condition in section 528A (further condition relating to shares) must be met in relation to the period (but see subsection (3A)),
(b) the group must throughout the period have property rental business in relation to which conditions A and B in section 529 are met or in relation to which condition C is met (whether or not the group also has other business),
(c) the condition in section 530 (distribution of profits) must be met in relation to the period,
(d) conditions A and B in section 531 (balance of business) must be met in relation to the period, and
(e) the principal company must prepare for the period, and submit to an officer of Revenue and Customs, financial statements under section 532.
(3) In order for a company which has given a notice under section 524 to be a company UK REIT in relation to an accounting period—
(a) each of the conditions in section 528 (conditions for company) must be met in relation to the company throughout the accounting period,
(aa) the condition in section 528A (further condition relating to shares) must be met in relation to the period, (but see subsection (3A))
(b) the company must throughout the period have property rental business in relation to which conditions A and B in section 529 are met or in relation to which condition C is met (whether or not the company also has other business),
(c) the condition in section 530 (distribution of profits) must be met in relation to the period, and
(d) conditions A and B in section 531 (balance of business) must be met in relation to the period.
(3A) Subsections (2)(aa) and (3)(aa) do not apply in relation to a period, or to any part of a period, in respect of which condition C in section 528 is met as a result of subsection (3)(b) of that section.
(4) Subsections (2) and (3) are subject to any relaxation of any condition in section 525, 558 or 559 or Chapter 8.
(5) Subsections (2)(a) and (3)(a) are also subject to subsections (6) to (8).
(6) If the accounting period ends during the first 3-year period, condition D in section 528 does not have to be met.
(7) If the accounting period begins, but does not end, during the first 3- year period, condition D in section 528 only has to be met throughout the part of the accounting period falling after the end of the first 3- year period.
(8) In subsections (6) and (7) “the first 3-year period” means the period of 3 years beginning with the date specified in the notice given under section 523 or 524.
(1) Condition A is that the company is a UK company.
(2) Condition B is that section 236 of FISMA 2000 (open-ended investment companies) does not apply to the company.
(3) Condition C is that—
(a) the shares forming the company's ordinary share capital are admitted to trading on a recognised stock exchange , or
(b) at least 70% of the shares forming the company’s ordinary share capital are owned by one or more institutional investors (see sections 528ZA and 528ZB).
(3A) Subsection (3B) applies where condition C ceases to be met in relation to a company UK REIT or the principal company of a group UK REIT as a result of subsection (3)(b) ceasing to apply in relation to that company.
(3B) The company is to be treated as if condition C continued to be met in relation to that company as a result of that subsection for the period of 12 months beginning with the day on which this subsection begins to apply.
(4) Condition D is that the company meets the non-close condition.
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4A) Institutional investor” means any of the following persons—
(a) the trustee or manager of—
(i) an authorised unit trust scheme (as defined in section 237(3) of FISMA 2000) that meets the genuine diversity of ownership condition (see section 528ZB(2)) or the non-close condition, or
(ii) a unit trust scheme (as defined in section 237(1) of FISMA 2000) which is authorised under the law of a territory outside the United Kingdom in a way which makes it, under that law, the equivalent of an authorised unit trust scheme (as defined in section 237(3) of that Act) and that meets the genuine diversity of ownership condition or the non-close condition;
(b) a company—
(i) which is an open-ended investment company (as defined in section 236(1) of FISMA 2000) incorporated by virtue of regulations under section 262 of that Act and that meets the genuine diversity of ownership condition or the non-close condition, or
(ii) which is incorporated under the law of a territory outside the United Kingdom that is, under that law, the equivalent of an open-ended investment company (as defined in section 236(1) of FISMA 2000) and that meets the genuine diversity of ownership condition or the non-close condition;
(ba) a person acting on behalf of an authorised contractual scheme (within the meaning given by section 237(3) of FISMA 2000) which is a co-ownership scheme (within the meaning given by section 235A of that Act) that meets the genuine diversity of ownership condition or the non-close condition;
(bb) a person acting on behalf of a Reserved Investor Fund (Contractual Scheme) (within the meaning of section 20 to F(No.2)A 2024);”
(c) a person acting on behalf of a limited partnership which is a collective investment scheme (as defined in section 235 of FISMA 2000) that meets the genuine diversity of ownership condition or the non-close condition;
(d) the trustee or manager of a pension scheme (as defined in section 150(1) of FA 2004);
(e) a person acting in the course of a long-term insurance business (that is, the activity of effecting or carrying out contracts of long-term insurance within the meaning of the Financial Services and Markets (Regulated Activities) Order 2001 (S.I. 2001/544)) who meets the non-close condition and who—
(i) is authorised under FISMA 2000 to carry on such business, or
(ii) has an equivalent authorisation under the law of a territory outside the United Kingdom to carry on such business;
(f) a charity;
(g) a person registered under any of the following provisions (which provide for registers of social landlords)—
(i) in England, section 111 of the Housing and Regeneration Act 2008;
(ii) in Scotland, section 20 of the Housing (Scotland) Act 2010 (asp 17);
(iii) in Wales, section 1 of the Housing Act 1996;
(iv) in Northern Ireland, Article 14 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/1725 (N.I. 15));
(h) a person who cannot be liable for corporation tax or income tax (as relevant) on the ground of sovereign immunity.
(i) a UK REIT;
(j) a person who is resident in a territory outside the United Kingdom in accordance with the law of that territory relating to taxation and is ... the equivalent of a UK REIT
(4B) The Treasury may by regulations amend the definition of “institutional investor” by inserting, omitting or amending a description of person in subsection (4A).
(4C) The non-close condition is met—
(a) in relation to a company, if—
(i) it is not a close company, or
(ii) it is a close company but only because it has an institutional investor as a direct or indirect participator, and
(b) in relation to a person or scheme other than a company, if it would fall within paragraph (a)(i) or (ii) if—
(i) the person’s business or the scheme were a company, and
(ii) the interests of persons in the business or scheme were shares in the company.
(4D) But for the purposes of applying the non-close condition for the purpose of any of paragraphs (a) to (c) of subsection (4A), subsection (4C) has effect as if—
(a) paragraph (a)(ii) were omitted, and
(b) in paragraph (b), in the words before sub-paragraph (i), “or (ii)” were omitted.
(5) For the purposes of determining whether the non-close condition is met a company is to be treated as a close
(a) company if it is prevented from being a close company only by section 444 or 447(1)(a) , and
(b) ignore paragraph (a) of section 442 (non-UK resident companies deemed not to be close).
(5A) But subsection (5)(a) does not apply for the purpose of determining whether a person acting in the course of a long term insurance business meets the non-close condition.
(5B) For the purposes of subsection (4C)(a)(ii)—
(a) a person is a “direct participator” if the person is a participator for the purposes of Part 10 of CTA 2010 (see section 454), and
(b) a person is an “indirect” participator in a company if the person has a share or interest in the capital or income of the company through another body corporate or other bodies corporate.
(5C) In determining whether a person is an indirect participator—
(a) reference to having a share or interest in the capital or income of a company through a body corporate is to be read in accordance with sub-paragraphs (9) and (10) of paragraph 46 of Schedule 5AAA to TCGA 1992 (meaning of direct or indirect participator), and
(b) a person is regarded for the purposes of those sub-paragraphs, and for the purposes of subsection (5B)(b) of this section, as having a share or interest in the capital or income of a company if the person would be a participator in the company as a result of section 454(2) of CTA 2010.
(5D) In determining whether a company is a close company for the purposes of the non-close condition—
(a) the rights and powers of a person (“A”) are not to be attributed to another person (“P”) merely because A is a partner of P for the purposes of any attribution under section 451(4) (rights of a person's associates to be attributed to the person etc in determining “control”), and
(b) a company (“C”) is not to be regarded as a close company only because a person possesses or is entitled to acquire 50% or more of the voting power in C as a result of being—
(i) a manager of a collective investment vehicle (within the meaning of Schedule 5AAA to TCGA 1992), or
(ii) a general partner in a limited partnership which is a collective investment scheme.
(6) Condition E is that—
(a) each share issued by the company either—
(i) forms part of the company's ordinary share capital, or
(ii) is a non-voting restricted preference share, and
(b) there is no more than one class of ordinary share issued by the company.
(7) For the purposes of condition E—
(a) “restricted preference share” means a share which is a restricted preference share (within the meaning of section 160) or would be but for the fact that it carries a right of conversion into shares or securities in the company, and
(b) a share is “non-voting” if it carries no right to vote at a general meeting of the company or if it carries a right to vote which is contingent on the non-payment of a dividend and which has not become exercisable.
(8) Condition F is that in the case of a loan in respect of which the company is a debtor—
(a) the loan creditor is not entitled to an amount by way of interest which depends to any extent on the results of all or part of the company's business or on the value of any of the company's assets,
(b) the loan creditor is not entitled to an amount by way of interest which exceeds a reasonable commercial return on the consideration lent, and
(c) the loan creditor is entitled on repayment to an amount which either does not exceed the consideration lent or is reasonably comparable with the amount generally repayable (in respect of an equal amount of consideration) under the terms of issue of securities listed on a recognised stock exchange.
(9) For the purposes of condition F a loan is not dependent on the results of the company's business merely because the terms of the loan provide—
(a) for the interest to be reduced in the event of the results improving, or
(b) for the interest to be increased in the event of the results deteriorating.
528ZA Listing requirement: ownership by institutional investors
(1) This section applies for the purposes of section 528(3)(b) (listing requirement where at least 70% of shares are owned by institutional investors).
(2) A person “owns” ordinary share capital if the person owns it—
(a) directly,
(b) indirectly, or
(c) partly directly and partly indirectly.
(3) Sections 1155 to 1157 (meaning of “indirect ownership” and calculation of amounts owned indirectly) apply for the purposes of subsection (2).
(4) For the purposes of sections 1155 to 1157 as applied by subsection (3), treat references to a body corporate as including—
(a) an exempt unauthorised unit trust,
(b) anything which is included in references to a body corporate for the purposes of paragraph 46 of Schedule 5AAA to the TCGA 1992 (UK property rich collective investment vehicles etc) (see sub-paragraph (12) of that paragraph), and
(c) an authorised contractual scheme which is a co-ownership scheme,
and, in relation to an entity within paragraph (a), (b) or (c), references to ordinary share capital are to be treated as references to units or other corresponding interests in the entity concerned.
(5) A person is also to be regarded as owning ordinary share capital in a company in circumstances where the person would be regarded as holding shares in a company under paragraphs 12 and 13 of Schedule 7AC to TCGA 1992 (exemptions for disposals by companies with substantial shareholding).
(6) Where the assets of a partnership include ordinary share capital of a company, each partner is to be regarded as owning a proportion of that share capital equal to the partner’s proportionate interest in that ordinary share capital.
(7) But subsection (6) does not apply in relation to a limited partnership if a person acting on behalf of it would be an institutional investor as a result of section 528(4A)(c).
(8) In subsection (4)—
“authorised contractual scheme” and “co-ownership scheme” have the meanings given by sections 237(3) and 235A, respectively, of FISMA 2000;
“exempt unauthorised unit trust” has the same meaning as in the Unauthorised Unit Trusts (Tax) Regulations 2013 (S.I. 2013/2819).
(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) A collective investment scheme meets the genuine diversity of ownership condition at any time if, at that time, the scheme meets or, if the scheme is part of multi-vehicle arrangements, the arrangements meet—
(a) the conditions in regulation 75(2), (3) and (4)(a) of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), or
(b) the condition in regulation 75(5) of those Regulations (assuming for this purpose that regulation 75(4)(b) is omitted),
....
(2A) For the purposes of subsection (2), those Regulations have effect as if references to a fund included—
(a) multi-vehicle arrangements, and
(b) a collective investment scheme which is not an offshore fund.
(3) For the purposes of determining whether a collective investment scheme meets the genuine diversity of ownership condition as mentioned in subsection (2), the fact that (for any reason) the capacity of the scheme to receive investments is limited does not prevent regulation 75(3) of the Offshore Funds (Tax) Regulations 2009 (including as it applies for the purposes of regulation 75(5) of those Regulations) from being met.
(4) Subsection (3) does not apply if—
(a) the limited capacity of the scheme to receive investments is fixed by the documents of the scheme (or otherwise), and
(b) a pre-determined number of specific persons, or specific groups of connected persons, make investments in the scheme that collectively exhaust all, or substantially all, of that capacity.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) Where the collective investment scheme is part of multi-vehicle arrangements, subsections (3) to (5) apply as if references to “the scheme” included the multi-vehicle arrangements.
(7) In this section —
“collective investment scheme” has the meaning it has in section 235 of FISMA 2000;
“multi-vehicle arrangements” means arrangements comprising two or more schemes under which an investor in one of those schemes would reasonably regard that investment as an investment in the arrangements as a whole rather than exclusively in any particular scheme.
(1) In the case of a group UK REIT, the condition in this section is met in relation to an accounting period if—
(a) throughout the accounting period, the shares forming the principal company's ordinary share capital meet the requirement of section 1137(2)(b) (definition of “listed” in relation to shares), or
(b) during the accounting period, shares forming part of the principal company's ordinary share capital are traded on a recognised stock exchange.
(2) In the case of a company UK REIT, the condition in this section is met in relation to an accounting period if—
(a) throughout the accounting period, the shares forming the company's ordinary share capital meet the requirement of section 1137(2)(b) (definition of “listed” in relation to shares), or
(b) during the accounting period, shares forming part of the company's ordinary share capital are traded on a recognised stock exchange.
(3) This section is subject to section 528B.
528B Relaxation of section 528A condition for accounting periods 1 to 3
(1) This section relaxes the requirements of section 528A in relation to accounting period 1, accounting period 2 and accounting period 3.
(2) In the case of a group UK REIT, the condition in section 528A is met in relation to accounting period 1, accounting period 2 and accounting period 3 if—
(a) at the end of the relevant period, the shares forming the principal company's ordinary share capital meet the requirement of section 1137(2)(b) (definition of “listed” in relation to shares), or
(b) during the relevant period, shares forming part of the principal company's ordinary share capital are traded on a recognised stock exchange.
(3) In the case of a company UK REIT, the condition in section 528A is met in relation to accounting period 1, accounting period 2 and accounting period 3 if—
(a) at the end of the relevant period, the shares forming the company's ordinary share capital meet the requirement of section 1137(2)(b) (definition of “listed” in relation to shares), or
(b) during the relevant period, shares forming part of the company's ordinary share capital are traded on a recognised stock exchange.
(4) In this section—
“accounting period 2” means the accounting period following accounting period 1,
“accounting period 3” means the accounting period following accounting period 2, and
“the relevant period” means the period consisting of accounting period 1, accounting period 2 and accounting period 3.
(1) Condition A is that the property rental business involves at least 3 properties.
(2) Condition B is that no single property represents more than 40% of the total value of the properties involved in the property rental business.
(2A) Condition C is , or was at any time from the relevant time, that the property rental business involves at least 1 property—
(a) the value of which is equal to, or in excess of, £20 million ..., and
(b) which is designed, fitted or equipped for the purpose of being rented, and is rented or available for rent, as a commercial unit.
(2B) For the purposes of subsection (2A) the “relevant time” means the later of—
(a) entry, and
(b) when the property was acquired.
(3) For the purposes of conditions A to C the property rental businesses of the members of a group are to be treated as a single business.
(4) For the purposes of conditions A to C—
(a) a reference to a property “involved” in a business is a reference to an estate, interest, or right by the exploitation of which the business is conducted,
(b) a property is a single property if it is designed, fitted or equipped for the purpose of being rented, and it is rented or available for rent, as a commercial or residential unit (separate from any other commercial or residential unit),
(c) assets must be valued in accordance with international accounting standards,
(d) where international accounting standards offer a choice of valuation between cost basis and fair value, fair value must be used, and
(e) no account is to be taken of liabilities secured against or otherwise relating to assets (whether generally or specifically).
(5) If a percentage of the profits of property rental business of a member of a group UK REIT is excluded from a financial statement in accordance with section 533(3), that percentage of the member's property rental business is to be ignored for the purposes of subsection (2).
(1) In the case of a group UK REIT, the condition in this section is met in relation to an accounting period if—
(a) so much of the group's UK profits arising in the period as are UK REIT investment profits (see section 549A), and
(b) at least 90% of the rest of the group's UK profits arising in the period,
are distributed by the principal company of the group on or before the filing date for the principal company's tax return for the period (see paragraph 14 of Schedule 18 to FA 1998).
(2) In subsection (1) “UK profits” means the sum of the profits of members of the group as shown in the financial statement under section 532(2)(b) (group's property rental business in UK).
(3) Subsection (1) is to be ignored so far as—
(a) the condition applies to profits of the property rental business attributable to a member of the group, and
(b) compliance with the condition by the member would (if the condition applied to it) be unlawful as a result of a relevant enactment.
(4) In the case of a company UK REIT, the condition in this section is met in relation to an accounting period if—
(a) so much of the profits of the company's property rental business arising in the period as are UK REIT investment profits (see section 549A), and
(b) at least 90% of the rest of the profits of the company's property rental business arising in the period,
are distributed on or before the filing date for the company's tax return for the period (see paragraph 14 of Schedule 18 to FA 1998).
(4A) For the purposes of subsection (4) profits of the company's property rental business are to be calculated in accordance with section 599.
(5) Subsection (4) is to be ignored so far as compliance with the condition would be unlawful as a result of a relevant enactment.
(6) A distribution that is withheld in order to prevent or reduce a charge to tax arising under section 551 (distribution to holder of excessive rights) is to be treated for the purposes of this section as having been made.
(6A) In this section, references (however expressed) to a distribution are to either or both of the following—
(a) a dividend in cash, and
(b) share capital issued in lieu of a cash dividend.
(6B) Section 1051(2) to (4) (meaning of “share capital issued in lieu of a cash dividend”) applies for the purposes of subsection (6A) as it applies for the purposes of section 1049(1)(a).
(6C) Subsection (6D) applies if—
(a) (apart from that subsection) there would be a a failure to meet the condition in this section in relation to an accounting period, and
(b) that failure would arise solely by reason of the operation, by virtue of section 599A(2), of section 412(2) of ITTOIA 2005 (substitution of market value) in relation to any distributions within subsection (6A)(b).
(6D) Subsection (1) or (4) (as the case may be) is to have effect in relation to that accounting period as if for the words “on or before” there were substituted “before the end of the period of 6 months beginning with”.
(7) In this section “relevant enactment” means—
(a) an enactment (including Northern Ireland legislation and an Act of the Scottish Parliament), or
(b) an enactment of a jurisdiction outside the United Kingdom if the enactment is prescribed, or is of a kind prescribed, for the purposes of this paragraph in regulations made by the Commissioners for Her Majesty's Revenue and Customs.
530A Condition as to distribution of profits: increase in profits after delivery of tax return
(1) Section 530(1) applies subject to subsection (2) below in relation to an accounting period if—
(a) the principal company of the group delivered with its tax return for the period the financial statement under section 532(2)(b) showing the amount of the UK profits of the group arising in the period, and
(b) as at the relevant date, those profits have been increased from the amount originally shown in the statement.
(2) Any distribution of those profits made by the principal company before the end of the relevant period is to be treated as having been made within the deadline set by section 530(1) .
(3) But the total amount of profits that may be treated as having been distributed within that deadline by virtue of subsection (2) is limited to 90% of the amount of the increase in profits.
(4) In subsections (1) and (2) (and this subsection)—
“the relevant date” means the date on which the principal company's tax return can no longer be amended,
“the relevant period” means the period of 3 months beginning with the relevant date, and
“UK profits” has the meaning given by section 530(2).
(5) Section 530(4) applies subject to subsection (6) below in relation to an accounting period if—
(a) the company delivered its tax return for the period showing the amount of the profits of its property rental business arising in the period as calculated in accordance with section 599, and
(b) as at the relevant date, those profits have been increased from the amount originally shown in the return.
(6) Any distribution of those profits made before the end of the relevant period is to be treated as having been made within the deadline set by section 530(4) .
(7) But the total amount of profits that may be treated as having been distributed within that deadline by virtue of subsection (6) is limited to 90% of the amount of the increase in profits.
(8) In subsections (5) and (6) (and this subsection)—
“the relevant date” means the date on which the company's tax return can no longer be amended, and
“the relevant period” means the period of 3 months beginning with the relevant date.
(9) In this section “distribution” is to be read in accordance with section 530(6A) and (6B).
(10) This section cannot be relied upon to satisfy the requirement of section 530(1)(a) or (4)(a).
(1) Condition A is that in the accounting period profits of property rental business are at least 75% of the aggregate profits of the group or company (as the case may be).
(2) “Aggregate profits”, in the case of a group, means the sum of—
(a) the profits of property rental business of members of the group ..., and
(b) the profits of residual business of members of the group ...
(2A) Where the matters mentioned in section 533(1)(a) to (ca) must be specified in a financial statement under section 532(2)(a) or (c) in relation to each member of a group (see section 533(1C))—
(a) the reference in subsection (2)(a) to the profits of property rental business of members of the group are to those profits as shown in the financial statement under section 532(2)(a), and
(b) the reference in subsection (2)(b) to the profits of residual business of members of the group are to those profits as shown in the financial statement under section 532(2)(c).
(3) “Aggregate profits”, in the case of a company, means the sum of—
(a) profits of property rental business of the company, and
(b) profits of residual business of the company.
(4) ... References in subsections (1) to (3) to profits are to profits before deduction of tax, calculated in accordance with international accounting standards, and excluding—
(a) realised and unrealised gains and losses on the disposal of property,
(b) changes in the fair value of hedging derivative contracts (within the meaning given by section 599(4)), ...
(c) items which are outside the ordinary course of the group's or, as the case may be, the company's business (irrespective of their treatment in the group's or company's accounts), having regard to that group's or company's past transactions, and
(d) profits of residual business of the company or, as the case may be, group resulting from compliance with planning obligations entered into in accordance with section 106 of the Town and Country Planning Act 1990 in the course of the property rental business of the company or group.
(4A) In the case of a group, for the purposes of subsections (1) and (2) a distribution falling within section 549A(6) or (8) received by a member of the group is to be treated as profits of a property rental business in accordance with section 549A(1) notwithstanding section 549A(5).
(4B) In the case of a company, for the purposes of subsections (1) and (3) a distribution falling within section 549A(6) or (8) received by the company is to be treated as profits of a property rental business in accordance with section 549A(1) notwithstanding section 549A(5).
(5) Condition B is that at the beginning of the accounting period the sum of—
(a) the value of the assets relating to property rental business, and
(b) the value of the assets relating to residual business so far as consisting of cash or relevant UK REIT shares ,
is at least 75% of the total value of assets held by the group or company (as the case may be).
(6) For the purposes of condition B as it applies in the case of a group , where the matters mentioned in section 533(1)(d) must be specified in a financial statement under section 532(2)(a) and (c) in relation to each member of the group (see section 533(1G))—
(a) the amount shown in the financial statement under section 532(2)(a) as the amount of the assets of members of the group is to be treated as the amount of the assets relating to property rental business, and
(b) the amount shown in the financial statement under section 532(2)(c) as the amount of the assets of members of the group is to be treated as the amount of the assets relating to residual business (and the amount of the group's cash and relevant UK REIT shares is to be determined accordingly) .
(7) For the purposes of condition B as it applies in the case of a company—
(a) an asset relates to property rental business if it would be shown as an asset if separate accounts were prepared for the property rental business,
(b) assets must be valued in accordance with international accounting standards,
(c) where international accounting standards offer a choice of valuation between cost basis and fair value, fair value must be used, and
(d) no account is to be taken of liabilities secured against or otherwise relating to assets (whether generally or specifically).
(7A) References in subsections (5) to (7) to assets are to assets excluding—
(a) assets held solely in connection with the items mentioned in subsection (4)(b) and (c), and
(b) assets of residual business of members of the group or of the company held solely as a result of compliance with planning obligations entered into as mentioned in subsection (4)(d).
(8) In this section “cash” means—
(a) money held on deposit (whether or not in sterling),
(b) stocks or bonds of any description included in Part 1 of Schedule 11 to FA 1942 (gilts), or
(c) money held in any other way, or any investment of any other form, specified in regulations made by the Commissioners for Her Majesty's Revenue and Customs.
(9) In this section “relevant UK REIT shares” means—
(a) in the case of a group UK REIT, shares held by a member of the group in the principal company of another group UK REIT or in a company UK REIT, and
(b) in the case of a company UK REIT, shares held by the company in the principal company of a group UK REIT or in another company UK REIT.
(1) This section and section 533 set out the requirements referred to in section 527(2)(e) for financial statements in relation to a group UK REIT for an accounting period.
(2) The principal company must prepare—
(a) a financial statement for the group's property rental business for the accounting period,
(b) a financial statement for the group's property rental business in the United Kingdom for the period, and
(c) a financial statement for the group's residual business for the period.
(3) The reference in subsection (2)(b) to the group's property rental business in the United Kingdom is a reference to—
(a) property rental business of UK members of the group, and
(b) UK property rental business of other members.
(1) A financial statement under section 532(2)(a) or (c) must specify, in relation to ... the group—
(a) profits (calculated in accordance with international accounting standards),
(b) expenses (calculated in accordance with international accounting standards),
(c) profits before tax excluding gains or losses on property (whether realised or not) calculated in accordance with international accounting standards, ...
(ca) the items specified in section 531(4)(b) to (d), and
(d) assets , including assets within subsection (1ZA), valued—
(i) at the beginning of the accounting period,
(ii) in accordance with international accounting standards,
(iii) using fair value where there is a choice, and
(iv) ignoring liabilities secured against or otherwise relating to the assets.
(1ZA) Assets are within this subsection if they are held solely—
(a) in connection with the items mentioned in section 531(4)(b) and (c), or
(b) as a result of compliance with planning obligations entered into as mentioned in section 531(4)(d).
(1A) The profits and gains of the UK property rental business of a non-UK member of the group are to be treated as if they were profits and gains of a UK resident member of the group for the purposes of a financial statement under section 532(2)(a).
(1B) Subsection (1C) applies where in the accounting period for which statements are prepared under section 532(2) profits of the group’s property rental business are less than 80% of the sum of—
(a) the profits of property rental business of the group, and
(b) the profits of residual business of the group.
(1C) In addition to being specified in relation to the group, the matters mentioned in subsection (1)(a) to (ca) must be specified in a financial statement under section 532(2)(a) or (c) in relation to each member of the group.
(1D) For the purposes of establishing whether subsection (1C) applies—
(a) the references to profits in subsection (1B) are to profits determined in the same way as profits are determined in accordance with section 531(4);
(b) any expenses relating to both property rental business and residual business are to be apportioned on a just and reasonable basis.
(1E) Where the effect of subsections (1B) and (1C) is that there is no requirement to specify in a financial statement for an accounting period under section 532(2)(a) or (c) the matters mentioned in subsection (1)(a) to (ca) in relation to each member of a group, it is to be assumed that the group meets condition A in section 531(1) in relation to that accounting period.
(1F) Subsection (1G) applies where, at the beginning of the accounting period for which statements are prepared under section 532(2), the sum of—
(a) the value of the assets relating to property rental business, and
(b) the value of the assets relating to residual business so far as consisting of cash or relevant UK REIT shares,
is less than 80% of the total value of assets held by the group.
(1G) In addition to being specified in relation to the group, the matters mentioned in subsection (1)(d) must be specified in a financial statement under section 532(2)(a) or (c) in relation to each member of the group.
(1H) For the purposes of establishing whether subsection (1G) applies, references to assets in subsection (1F) are to the assets excluding—
(a) assets held solely in connection with the items mentioned in section 531(4)(b) and (c), and
(b) assets held solely as a result of compliance with planning obligations entered into as mentioned in section 531(4)(d).
(1I) Where the effect of subsections (1F) and (1G) is that there is no requirement to specify in a financial statement for an accounting period under section 532(2)(a) or (c) the matters mentioned in subsection (1)(d) in relation to each member of a group, it is to be assumed that the group meets condition B in section 531(5) in relation to that accounting period.
(2) A financial statement under section 532(2)(b) must specify profits (calculated in accordance with section 599) for each member of the group.
(3) If a non-member of the group holds a percentage of the beneficial interest in a member of the group (other than the principal company), the financial statements under section 532(2) must exclude that percentage of profits, expenses, gains, losses, assets and liabilities of the member.
(4) Percentages of beneficial interest for the purposes of subsection (3) are to be determined by reference to beneficial entitlement to profits available for distribution to equity holders.
(5) The Commissioners for Her Majesty's Revenue and Customs may by regulations—
(a) make further provision relating to the content of a financial statement under section 532,
(b) prescribe the form of a financial statement, and
(c) specify a time before which a financial statement must be submitted to an officer of Revenue and Customs.
(6) Regulations under subsection (5)(a) may in particular—
(a) permit or require apportionment or otherwise prescribe or refer to accounting practice;
(b) provide for the inclusion or exclusion of specified profits, expenses, gains, losses, assets and liabilities;
(c) make provision about the treatment of an interest in a business held by a member.
(1) Profits of property rental business of a UK company which is, or is a member of, a UK REIT are not charged to corporation tax.
(2) Profits of UK property rental business of a non-UK member of a group UK REIT are not charged to corporation tax.
(3) Profits which—
(a) arise from the residual business of a UK company which is, or is a member of, a UK REIT, and
(b) are charged to corporation tax,
are to be charged at a rate determined without reference to sections 18A and 18B (companies with small profits).
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) If a percentage of the profits of property rental business of a member of a group UK REIT is excluded from a financial statement in accordance with section 533(3), that percentage of those profits is to be treated for corporation tax purposes as profits of residual business of the member.
(5) For the purposes of subsections (1) and (2) profits are to be calculated in accordance with section 599.
(1) A gain on the disposal of an asset is not a chargeable gain if—
(a) the gain accrues to a company which is, or is a member of, a UK REIT, and
(b) condition A or B is met in relation to the asset.
(2) Condition A is that the asset was used wholly and exclusively for the purposes of property rental business of the company.
(3) Condition B is that the asset was used during one or more periods of (in total) less than a year—
(a) partly for the purposes of property rental business of the company, and
(b) partly for the purposes of residual business of the company,
but was otherwise used as mentioned in subsection (2).
(4) Subsection (5) applies if a gain accrues to a company which is, or is a member of, a UK REIT on the disposal of an asset which for one or more periods of (in total) at least a year has been used—
(a) partly for the purposes of property rental business of the company, and
(b) partly for the purposes of residual business of the company.
(5) Such part of the gain as may reasonably be attributed to property rental business of the company, having regard to—
(a) the extent to which the asset was used for the different purposes, and
(b) the length of the periods during which it was used for those purposes,
is not a chargeable gain.
(6) Gains which—
(a) accrue to residual business of a company which is, or is a member of, a UK REIT, and
(b) are charged to corporation tax,
are to be charged at a rate determined without reference to sections 18A and 18B (companies with small profits).
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) If a percentage of the gains of property rental business of a member of a group UK REIT is excluded from a financial statement in accordance with section 533(3), that percentage of those gains is to be treated for corporation tax purposes as gains of the member's residual business.
(8) This section has effect in relation to a non-UK member of a group UK REIT as if references to property rental business of the member were to its UK property rental business.
(9) This section is to be read as if it were contained in TCGA 1992.
535A Gains: disposals of rights or interests in UK property rich companies
(1) This section applies if—
(a) a company (“A”) which is, or is a member of, a UK REIT disposes of an asset, and
(b) the asset consists of a right or an interest in a company (“B”) which is UK property rich.
(2) The appropriate proportion of a gain accruing to A on the disposal is not a chargeable gain.
(3) The asset disposed of is regarded for the purposes of section 550 as used for the purposes of A’s property rental business to an extent equal to the appropriate proportion.
(4) In the case of a non-UK member of a group UK REIT, this section has effect as if any reference to property rental business of the member were to its UK property rental business.
(5) In relation to a disposal of a right or interest in B—
(a) B is “UK property rich” for the purposes of this section if the disposal would be regarded for the purposes of Schedule 1A to TCGA 1992 as a disposal of an asset deriving at least 75% of its value from UK land, and
(b) any reference in this section to “the appropriate proportion” is to the proportion that, at the beginning of the accounting period in which the disposal is made, the value of B’s relevant PRB assets bears to the total value of B’s assets.
(6) For the purposes of subsection (5)(b)—
(a) “the value of B’s relevant PRB assets” means the value of B’s assets deriving (directly or indirectly) from assets used for the purposes of UK property rental business,
(b) B’s assets are to be valued in accordance with section 533(1)(d), and
(c) if the asset disposed of was acquired after the beginning of the accounting period, it is to be assumed that an accounting period began on the day on which the disposal is made.
(7) Any reference in this section to the disposal of a right or interest in B includes the disposal of a right or interest in an offshore collective investment vehicle (a “relevant fund”)—
(a) to which paragraph 8 of Schedule 5AAA to TCGA 1992 applies, but
(b) in relation to which an election under that paragraph has not been made.
(7A) Any such reference also includes the disposal of a right or interest in a fund (a “relevant fund”) that—
(a) is an authorised contractual scheme (within the meaning given by section 237(3) of FISMA 2000) which is a co-ownership scheme (within the meaning given by section 235A of that Act) , or is a Reserved Investor Fund (Contractual Scheme) (within the meaning of section 20 of F(No.2)A 2024), and
(b) is UK property rich as determined in accordance with paragraph 3 of Schedule 5AAA to TCGA (UK property rich collective investment vehicles etc).
(8) In the case of a disposal which is, as a result of subsection (7) or (7A), a disposal of a right or interest in B, the value of B’s relevant PRB assets for the purposes of subsection (5)(b) is taken to be—
(a) the value of B’s assets that are used for the purposes of UK property rental business, plus
(b) the value of B’s assets deriving indirectly from assets held by a relevant fund that are used for the purposes of UK property rental business.
(9) This section is to be read as if it were contained in TCGA 1992.
(10) Apart from subsection (7) of section 535, nothing else in that section applies in relation to a disposal to which this section applies.
(11) This section does not apply to a gain—
(a) if sub-paragraph (3) of paragraph 3A of Schedule 7AC to TCGA 1992 applies in relation to the gain (no chargeable gain accruing on disposals of certain shares by qualifying institutional investors), or
(b) so far as sub-paragraph (4) of that paragraph applies to reduce the amount of the gain.
535B Section 535A: use of pre-April 2019 residual business losses or deficits
(1) In determining the amount of a gain accruing to a company which is not to be a chargeable gain as a result of section 535A, any pre-April 2019 residual business losses or deficits which—
(a) have not been deducted from (or taken into account in calculating) other profits or gains (of any kind) of the company or any other person, and
(b) have not previously been deducted under this subsection,
may be deducted from the gain.
(2) For this purpose “pre-April 2019 residual business losses or deficits” means—
(a) allowable losses accruing on disposals made before 6 April 2019, or
(b) deficits or other losses for accounting periods ending before that date,
which would otherwise have been deducted from (or taken into account in calculating) profits or gains (of any kind) accruing to residual business of the company.
(3) If an accounting period (a “straddling period”) begins before and ends on or after 6 April 2019—
(a) so much of the straddling period as falls before that date, and so much of it as falls on or after that date, are to be treated as separate accounting periods, and
(b) if it is necessary to apportion an amount for the straddling period to the two separate accounting periods, it is to be apportioned—
(i) on a time basis according to the respective length of the separate accounting periods, or
(ii) if that would produce a result that is unjust or unreasonable, on a just and reasonable basis.
(4) In determining, for the purposes of subsection (2)(a), the amount of allowable losses accruing on disposals made before 6 April 2019 which would otherwise have been deducted from gains accruing to residual business of the company, section 269ZBA (restriction on deductions) is to be ignored.
(1) Property rental business carried on before entry by a company which becomes, or becomes a member of, a UK REIT (an “incoming company”) is to be treated for corporation tax purposes as ceasing at entry.
(2) Assets which immediately before entry are involved in property rental business of an incoming company are to be treated for corporation tax purposes as being—
(a) sold by the pre-entry company immediately before entry, and
(b) reacquired immediately after entry by the company so far as it carries on property rental business.
(3) The sale and reacquisition deemed under subsection (2) is to be treated as being for a consideration equal to the market value of the assets.
(4) A gain accruing as a result of subsection (2) is not a chargeable gain.
(5) For corporation tax purposes, one accounting period of an incoming company ends on entry and a new one begins.
(6) In the case of a group UK REIT—
(a) if a percentage of the assets of a member of the group is excluded from a financial statement in accordance with section 533(3), that percentage of those assets is to be ignored in the application of subsection (2) to the member, and
(b) this section has effect in relation to a non-UK member of the group as if references to property rental business were references to UK property rental business of the member.
(7) This section does not apply if—
(a) a company which was a member of one group UK REIT becomes a member of a different group UK REIT, or
(b) a company which was a company UK REIT becomes a member of a group UK REIT.
(8) This section and section 537 are subject to section 559 (demergers: company leaving group UK REIT).
(9) For the meaning of “entry”, see section 607(1).
(1) Subsections (2) to (4) apply for the purposes of CAA 2001.
(2) The sale and reacquisition deemed under section 536(2)—
(a) does not give rise to allowances or charges, and
(b) does not enable an election to be made under section 198 or 199 of CAA 2001 (apportionment).
(3) Section 536(3) (deemed consideration for sale and reacquisition) does not apply.
(4) Anything done by or to a company which becomes, or becomes a member of, a UK REIT in relation to an asset which is deemed under section 536(2) to be sold and reacquired is to be treated after entry as having been done by or to the company so far as it carries on property rental business.
(1) This section applies—
(a) in the case of a group UK REIT, to the group and to each company which is a member of the group, and
(b) to a company UK REIT.
(2) For corporation tax purposes property rental business of the group or company is treated as a separate business, distinct from—
(a) business of the pre-entry group or pre-entry company,
(b) residual business of the group or company, and
(c) business of the post-cessation group or post-cessation company.
(3) For corporation tax purposes the group or company is treated as a separate group or company so far as it carries on property rental business, distinct from—
(a) the pre-entry group or pre-entry company,
(b) the group or company so far as it carries on residual business, and
(c) the post-cessation group or post-cessation company.
(4) In particular—
(a) a loss made in property rental business may not be set off against profits of residual business,
(b) a loss made in residual business may not be set off against profits of property rental business,
(c) a loss made in business carried on before entry may not be set off against profits of property rental business,
(d) a loss made in property rental business may not be set off against profits of business carried on after cessation (in respect of business of any kind), and
(e) receipts accruing after entry but relating to business carried on before entry are not treated as receipts of property rental business.
(5) Nothing in this section prevents a loss made in business carried on before entry from being set off against profits of residual business.
(6) In subsections (4) and (5) references to a loss include references to a deficit, expense, charge or allowance.
(7) If a percentage of the profits of property rental business of a member of a group UK REIT is excluded from a financial statement in accordance with section 533(3), that percentage of those profits is to be treated for the purposes of this section as profits of the member's residual business.
(8) This section has effect in relation to a non-UK member of a group, as if references to property rental business were references to UK property rental business.
(9) For the meaning of “cessation”, see section 607(2).
(1) Section 66 (ring-fencing of losses from overseas property business) does not apply to property rental business of a UK company which is, or is a member of, a UK REIT.
(2) Sections 166 to 171 of TIOPA 2010 (transfer pricing: exemption for small and medium enterprises) do not apply to a UK company which is, or is a member of, a UK REIT (whether to property rental business or residual business of the company).
(1) This section applies to a UK REIT if the result of the calculation in subsection (2) is less than 1.25 for an accounting period (unless it is nil or a negative amount) .
(2) The calculation is—
P
P
P
F
C
where—
PP is the UK REIT's property profits for the accounting period (see section 544(1)), and
PFC is the UK REIT's property financing costs for the accounting period (see section 544(3)).
(3) The excess is charged to corporation tax in relation to the accounting period under the charge to corporation tax on income.
(3A) “The excess” means—
(a) the amount equal to—
(i) PFC, minus
(ii) the property financing costs which would cause the calculation in subsection (2) to equal 1.25 for the accounting period, or
(b) if less, the amount equal to 20% of PP.
(4) The excess is treated as profits of residual business—
(a) in the case of a group UK REIT, of the principal company of the group, and
(b) in the case of a company UK REIT, of the company.
(5) Accordingly, it is charged to corporation tax at the main rate of corporation tax.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) No loss, deficit, expense or allowance may be set off against the excess.
(7) The Commissioners for Her Majesty's Revenue and Customs may waive a charge to corporation tax under this section in respect of an accounting period if they think that—
(a) the company was in severe financial difficulties at a time in the accounting period,
(b) the result of the calculation in subsection (2) is less than 1.25 in respect of the accounting period because of circumstances that arose unexpectedly, and
(c) in those circumstances the company could not reasonably have taken action to avoid the result being less than 1.25.
(8) The Treasury may make regulations which specify criteria to be applied by the Commissioners in determining whether to waive a charge under subsection (7).
544 Meaning of “property profits” and “property financing costs”
(1) For the purposes of section 543 “property profits” for an accounting period means—
(a) in the case of a group UK REIT, the sum of the profits of property rental business of members of the group that arise in the period, as shown in the financial statement under section 532(2)(b), and
(b) in the case of a company UK REIT, the amount of the profits of the company's property rental business (calculated in accordance with section 599) that arise in the period.
(2) References in subsection (1) to a company's profits are to its profits before the offset of—
(a) capital allowances,
(b) losses from a previous accounting period, and
(c) amounts taken into account as a result of section 599(3).
(3) For the purposes of section 543 “property financing costs” for an accounting period means—
(a) in the case of a group UK REIT, the amount of the financing costs incurred in respect of the group's property rental business in the United Kingdom, excluding financing costs owed by one member of the group to another, as shown in the financial statement under section 532(2)(a), and
(b) in the case of a company UK REIT, the amount of the financing costs incurred in the period in respect of the company's property rental business.
(3A) The reference in subsection (3)(a) to the group's property rental business in the United Kingdom is a reference to—
(a) property rental business of UK members of the group, and
(b) UK property rental business of other members.
(4) In subsection (3) “financing costs” means the cost of debt finance.
(4A) But property financing costs do not (for the purposes of section 543) include any expense for which a deduction would not be allowed in calculating profits in accordance with section 599, other than an expense which is disallowed only as a result of the application of Part 10 of TIOPA 2010 (corporate interest restriction).
(5) In calculating the costs of debt finance in relation to an accounting period the matters to be taken into account are—
(a) interest payable on borrowing,
(b) amortisation of discounts relating to borrowing,
(c) amortisation of premiums relating to borrowing,
(d) the financing expense implicit in payments made under finance leases, ...
(e) alternative finance return (as defined in sections 511 to 513 of CTA 2009),
(f) periodic payments or receipts so far as they—
(i) are from any derivative contract or other arrangement entered into as a hedge of risk in connection with borrowing, and
(ii) are attributable to the hedge, and
(g) amortisation of discounts and premiums relating to a derivative contract or other arrangement within paragraph (f).
(5A) In subsection (5) “finance lease” means—
(a) in relation to any person, a lease that, in accordance with generally accepted accounting practice, falls (or would fall) to be treated in the accounts of that person as a finance lease or loan, or
(b) in relation to a lessee under a right-of-use lease, a lease that would fall to be treated in the accounts of the lessee as a finance lease if the lessee were required under generally accepted accounting practice to determine whether the lease falls to be so treated.
(5B) In subsection (5A)(b) “right-of-use lease” has the meaning given in Part 2 of CAA 2001 (see section 70YI(1) of that Act).
(6) The Treasury may by regulations amend the list of matters in subsection (5) by inserting, omitting or amending a description of a matter.