(1) If an officer of Revenue and Customs thinks that a company which is, or is a member of, a UK REIT has tried to obtain a tax advantage for itself or another person, the officer may give a notice to the company specifying the tax advantage.
(2) Subsections (3) and (4) apply if a notice is given under subsection (1).
(3) The tax advantage is to be counteracted, in accordance with the notice, by an adjustment by way of—
(a) an assessment;
(b) the cancellation of a right of repayment;
(c) a requirement to return a repayment already made;
(d) the calculation or recalculation of profits or gains, or liability to tax, on a basis specified in the notice.
(4) An officer of Revenue and Customs may (in addition to the adjustment under subsection (3)) assess the company to such amount of corporation tax or income tax (as the case may be) as the officer thinks is equivalent to the value of the tax advantage.
(5) For the purposes of this section “tax advantage” has the meaning given by section 1139....
(6) But a company does not obtain a tax advantage merely because it is, or is a member of, a UK REIT unless the company does anything (whether before or while it is, or is a member of, the UK REIT) which in the opinion of an officer of Revenue and Customs is wholly or principally designed—
(a) to create or inflate or apply a loss, deduction or expense (whether or not made or incurred by the company), or
(b) to have another effect of a kind specified for the purposes of this subsection by regulations made by the Treasury.
(1) A company which receives a notice under section 545(1) may appeal.
(2) An appeal must be made by notice given in writing to an officer of Revenue and Customs during the period of 30 days beginning with the date on which the notice under section 545(1) is given.
(3) On an appeal under subsection (2) that is notified to the tribunal, the tribunal may—
(a) quash the notice under section 545(1),
(b) affirm the notice, or
(c) vary the notice.
(1) This section applies if a—
(a) company UK REIT or a member of a group UK REIT disposes of an asset used wholly and exclusively for the purposes of property rental business, and
(b) the company UK REIT or any member of the group UK REIT holds the proceeds in cash.
(2) Profits or losses arising from a loan relationship entered into in connection with the proceeds—
(a) are to be ignored for the purposes of section 599 (calculation of profits), and
(b) are to be treated for all tax purposes as arising from a loan relationship entered into in connection with residual business.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) For the purposes of this section proceeds are held in cash if—
(a) held on deposit (whether or not in sterling),
(b) invested in stocks or bonds of any of the descriptions included in Part 1 of Schedule 11 to FA 1942 (gilts), or
(c) held or invested in such other form as the Commissioners for Her Majesty's Revenue and Customs may specify for the purposes of this section in regulations.
(5) In the case of 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,
this section applies to such part of the proceeds as may reasonably be attributed to the property rental business (having regard to the extent to which, and the length of the periods during which, the asset was used for the different purposes).
(6) This section also applies to proceeds held in cash by a company on a disposal of an asset so far as section 535A secures that the appropriate proportion of a gain or loss accruing on the disposal is not a chargeable gain or allowable loss.
(1) This section applies if a shareholder of the principal company of a group UK REIT receives a distribution of amounts shown in the financial statement under section 532(2)(a) (statement of group's property rental business) as—
(a) profits or gains (or both) of UK members of the group, or
(b) profits or gains (or both) of UK property rental business of non-UK members of the group.
(2) In subsection (1) the reference to the principal company includes a reference to the principal company of the post-cessation group.
(3) This section also applies if a shareholder of a company UK REIT receives a distribution in respect of profits or gains (or both) of property rental business of the company.
(4) In subsection (3) the reference to a company UK REIT includes a reference to the post-cessation company.
(5) If the shareholder is within the charge to corporation tax, the distribution is to be treated as profits of a UK property business (within the meaning given by section 205 of CTA 2009) so far as the distribution is a distribution of exempt profits .
(6) If the shareholder is not within the charge to corporation tax, the distribution is to be treated as profits of a UK property business (within the meaning given by section 264 of ITTOIA 2005) so far as the distribution is a distribution of exempt profits .
(7) In the case of a non-UK resident shareholder, the distribution is not non-resident landlord income for the purposes of regulations under section 971 of ITA 2007 (income tax due in respect of income of non-resident landlords).
(8) See sections 973 and 974 of ITA 2007 (income tax due in respect of distributions) for provision about the deduction of sums representing income tax in relation to distributions of a kind mentioned in this section.
(9) This section does not apply in relation to a distribution falling within section 549A(6) or (8) so far as the distribution is a distribution of exempt profits.
(10) For the purposes of this Chapter a distribution is a “distribution of exempt profits” so far as the distribution falls within section 550(2)(a), (aa), (c) or (d).
(11) In applying section 550 for the purposes of subsection (10) in relation to a distribution made by the principal company of a post-cessation group or by a post-cessation company—
(a) subsection (1)(a) is to be read as referring to the principal company of the post-cessation group, or (as the case may be)
(b) subsection (1)(b) is to be read as referring to the post-cessation company.
(1) Section 548 does not apply in relation to a shareholder so far as the shareholder—
(a) is a person who is charged to tax under Part 3 of CTA 2009 (trading income) in respect of distributions made by companies that are received in the course of a trade not consisting of insurance business,
(b) is a dealer in securities who is charged to income tax under Part 2 of ITTOIA 2005 (trading income) in respect of distributions made by companies,
(c) is an individual member of Lloyd's (within the meaning given by section 184(1) of FA 1993) and the distribution is made in respect of assets forming part of—
(i) a premium trust fund of the member (within the meaning given by section 174 of FA 1993), or
(ii) an ancillary trust fund of the member (within the meaning given by section 176 of that Act), or
(d) is a corporate member of Lloyd's (within the meaning given by section 230(1) of FA 1994) and the distribution is made in respect of assets forming part of—
(i) a premium trust fund belonging to the member (within the meaning given by section 222 of FA 1994), or
(ii) an ancillary trust fund belonging to the member (within the meaning given by section 223 of that Act).
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2A) Sections 409 to 413A of ITTOIA 2005 (stock dividend income from UK resident companies) do not apply to relevant distributions received by a shareholder so far as they are distributions of exempt profits .
(3) “Relevant distribution” means—
(a) in the case of a group UK REIT, a distribution from the principal company of the group of amounts shown in the financial statement under section 532(2)(a) (statement of group's property rental business) as—
(i) profits or gains (or both) of UK members of the group, or
(ii) profits or gains (or both) of UK property rental business of non-UK members of the group, and
(b) in the case of a company UK REIT, a distribution from the company in respect of profits or gains (or both) of its property rental business.
(3A) Relevant distribution” does not include a distribution falling within section 549A(6) or (8) so far as the distribution is a distribution of exempt profits.
(4) Relevant distributions received by a shareholder (so far as they are distributions of exempt profits) are to be treated for the purposes of section 548(5) and (6) as the profits of a single business (irrespective of whether the shareholder receives different distributions in different capacities).
(5) That single business is separate from—
(a) any other UK property business (within the meaning given by section 205 of CTA 2009) carried on by the shareholder,
(b) any other UK property business (within the meaning given by section 264 of ITTOIA 2005) carried on by the shareholder,
(c) any overseas property business (within the meaning given by section 206 of CTA 2009) carried on by the shareholder, and
(d) any overseas property business (within the meaning given by section 265 of ITTOIA 2005) carried on by the shareholder.
(6) If a shareholder is a partnership, subsection (4) applies to receipts by a partner of a share of any distribution as it applies to receipts by a shareholder.
549A Distributions from one UK REIT to another UK REIT
(1) If a company receives a distribution falling within subsection (6) or (8), the distribution is to be treated as profits of a property rental business carried on by the company in the United Kingdom.
Such profits are referred to in this Part as “UK REIT investment profits”.
(2) The property rental business mentioned in subsection (1) is to be treated as separate from any other property rental business of the company.
(3) References to profits of property rental business or UK property rental business are to be read as including UK REIT investment profits accordingly, including where the profits referred to are otherwise profits calculated in accordance with international accounting standards or section 599.
(4) Section 549(2) and (2A) applies in relation to distributions falling within subsection (6) or (8) as it applies in relation to relevant distributions.
(5) Subsection (1) applies in relation to a distribution only so far as the distribution is a distribution of exempt profits.
This is subject to section 531(4A) and (4B).
(6) A distribution falls within this subsection if—
(a) it is made by the principal company of a group UK REIT to a shareholder of the company which is—
(i) a member of another group UK REIT, or
(ii) a company UK REIT, and
(b) it is a distribution of amounts shown in the financial statements under section 532(2)(a) (statement of group's property rental business) as—
(i) profits or gains (or both) of UK members of the group, or
(ii) profits or gains (or both) of UK property rental business of non-UK members of the group.
(7) In subsection (6) the reference to a distribution made by the principal company includes a reference to a distribution made by the principal company of the post-cessation group.
(8) A distribution falls within this subsection if—
(a) it is made by a company UK REIT to a shareholder of the company which is—
(i) a member of a group UK REIT, or
(ii) another company UK REIT, and
(b) it is a distribution in respect of profits or gains (or both) of property rental business of the company.
(9) In subsection (8) the reference to a distribution made by a company UK REIT includes a reference to a distribution made by the post-cessation company.
(1) Subsection (2) applies to—
(a) distributions made by the principal company of a group UK REIT, and
(b) distributions made by a company UK REIT.
(2) The distributions are to be attributed—
(a) first, to distributions in satisfaction of the requirement of section 530(1)(a) or 530(4)(a) (as the case may be),
(aa) second, to distributions in satisfaction of the requirement of section 530(1)(b) or 530(4)(b) (as the case may be),
(b) third , so far as the company determines, to distribution of amounts which derive from activities of a kind in respect of which corporation tax is chargeable in relation to income,
(c) fourth , to distribution of profits of property rental business (calculated in accordance with section 599),
(d) fifth , to distribution of relevant non-chargeable gains, and
(e) sixth , to other distributions.
(3) In subsection (2)(d) “relevant non-chargeable gains” means—
(a) in the case of a group, gains accruing to property rental business of a member of the group, and
(b) in the case of a company, gains accruing to property rental business of the company,
which as a result of section 535 or 535A are not chargeable gains.
(4) In determining the amount of relevant non-chargeable gains for the purposes of this section, section 269ZBA (restriction on deductions) is to be ignored.
551 Tax consequences of distribution to holder of excessive rights
(1) Subsection (3) applies if—
(a) a distribution is made to or in respect of a holder of excessive rights that is not an excluded holder (both as defined by section 553), and
(b) the distributor has not taken reasonable steps to prevent a distribution to or in respect of such a person from being made.
(2) “The distributor” means—
(a) in the case of a group UK REIT, the principal company of the group, and
(b) in the case of a company UK REIT, the company.
(3) The distributor is treated as receiving an amount of income calculated in accordance with section 552 (“the section 552 amount”).
(4) The section 552 amount is chargeable to corporation tax under the charge to corporation tax on income.
(5) It is treated—
(a) as arising in the accounting period in which the distribution was made, and
(b) as profits of residual business of the distributor.
(6) Accordingly, it is charged to corporation tax at the main rate of corporation tax.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) No loss, deficit, expense or allowance may be set off against the section 552 amount.
(1) For the purposes of section 551, the section 552 amount is calculated by taking 3 steps.
(2) Step 1: find the amount given by—
D
O
×
S
O
×
B
R
T
M
C
T
where—
DO is—
in the case of a group UK REIT, the amount of the group's UK profits (as defined by section 530(2)) distributed in respect of ordinary shares in the principal company, and
in the case of a company UK REIT, the amount of profits of property rental business of the company distributed in respect of ordinary shares in the company,
SO is—
the percentage of rights in respect of those shares held by the holder of excessive rights, or
if less, the percentage of rights held by the recipient of the distribution,
in respect of which the distribution is made,
PBRT is the property basic rate of income tax in force at the time the distribution is made, and
MCT is the main rate of corporation tax.
(3) Step 2: find the amount given by—
D
P
×
S
P
×
B
R
T
M
C
T
where—
DP is—
in the case of a group UK REIT, the amount of the group's UK profits (as defined by section 530(2)) distributed in respect of preference shares in the principal company, and
in the case of a company UK REIT, the amount of profits of property rental business of the company distributed in respect of preference shares in the company,
SP is—
the percentage of rights in respect of those shares held by the holder of excessive rights, or
if less, the percentage of rights held by the recipient of the distribution,
in respect of which the distribution is made, and
PBRT and MCT have the same meaning as they have in subsection (2).
(4) Step 3: add together the amounts given by steps 1 and 2.
That amount is the section 552 amount.
553 Meaning of “holder of excessive rights” and “excluded holder”
(1) For the purposes of section 551 “holder of excessive rights” means a person who meets—
(a) condition A, and
(b) either condition B or C.
...
(2) Condition A is that the person—
(a) is beneficially entitled (directly or indirectly) to at least 10% of the distributions paid by the distributor,
(b) is beneficially entitled (directly or indirectly) to at least 10% of the distributor's share capital, or
(c) controls (directly or indirectly) at least 10% of the voting rights in the distributor.
(3) Condition B is that the person is a company.
(4) Condition C is that—
(a) the person is treated as a body corporate for tax purposes—
(i) in accordance with the law of a territory outside the United Kingdom with which arrangements have been entered into to provide relief from double taxation, or
(ii) in accordance with an international agreement containing such arrangements, and
(b) those arrangements have effect by virtue of an Order in Council under section 2 of TIOPA 2010.
(4A) For the purposes of section 551, a holder of excessive rights is an “excluded holder” if—
(a) in accordance with double taxation arrangements (within the meaning of section 2(4) of TIOPA 2010), the holder is taxed at a particular rate, or not taxed at all, on distributions from a UK REIT, unless the sole reason for that treatment is the size of the holder’s interest in the UK REIT, or
(b) the holder is a person to whom a payment of a distribution must be made without deduction of income tax in accordance with regulation 7 of the Real Estate Investment Trusts (Assessment and Recovery of Tax) Regulations 2006 (S.I. 2006/2867) (gross payment of distributions).
(5) In subsection (2) “the distributor” has the meaning given by section 551(2).
554 Regulations: distributions to holders of excessive rights
(1) The Treasury may by regulations make provision of the kind mentioned in subsection (2) for cases where—
(a) the principal company of a group UK REIT, or
(b) a company UK REIT,
makes a distribution to or in respect of a holder of excessive rights (as defined by section 553).
(2) The provision referred to in subsection (1) is—
(a) provision that a charge does not arise, or is reduced, if the company takes or does not take action of a specified kind;
(b) a requirement for the company to provide the Commissioners for Her Majesty's Revenue and Customs with specified information relating to the distribution and the persons to or in respect of whom it is made.
(1) In this Chapter, references (however expressed) to a distribution include share capital issued in lieu of a cash dividend.
(2) Section 1051(2) to (4) (meaning of “share capital issued in lieu of a cash dividend”) applies for the purposes of this section as it applies for the purposes of section 1049(1)(a).
(1) Subsection (2) applies if—
(a) an asset has been used wholly and exclusively for the purposes of property rental business of a company which is, or is a member of, a UK REIT, and
(b) the asset begins to be used (otherwise than by being disposed of in the course of trade) wholly and exclusively for the purposes of residual business of the company.
(2) The asset is treated as having been at that time—
(a) disposed of by the company so far as it carries on property rental business, and
(b) immediately reacquired by the company so far as it carries on residual 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 asset.
(4) For the purposes of CAA 2001—
(a) a sale and reacquisition deemed under subsection (2)—
(i) does not give rise to allowances or charges, and
(ii) does not make it possible to make an election under section 198 or 199 of that Act (apportionment),
(b) subsection (3) does not apply, and
(c) anything done by or to the company so far as it carries on property rental business before the deemed sale and reacquisition is to be treated after the deemed sale and reacquisition as having been done by or to the company so far as it carries on residual business.
(5) 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.
(6) This section has effect in relation to a non-UK member of a group UK REIT as if references to property rental business were references to UK property rental business.
(7) Section 535 is relevant to the tax treatment of any gain arising to a company under this section.
(1) Subsection (2) applies if—
(a) an asset has been used wholly and exclusively for the purposes of property rental business of a company which is, or is a member of, a UK REIT, ...
(b) the asset is disposed of in the course of trade for the purposes of residual business of the company, and
(c) if the company is a member of a UK REIT, the disposal is not to another member of the UK REIT.
(2) If this subsection applies—
(a) the deemed sale and reacquisition under section 536(2) is to be ignored, and
(b) the asset is to be treated as having been disposed of in the course of the company's residual business.
(3) Subsection (2) is to be taken to apply in particular if—
(a) a property acquired by a company which is, or is a member of, a UK REIT has been developed since acquisition,
(b) the cost of the development exceeds 30% of the ... value of the property ... ,
(c) the company disposes of the property within the period of 3 years beginning with the completion of the development , and
(d) if the company is a member of a UK REIT, the disposal is not to another member of the UK REIT.
(3ZA) For the purposes of subsection (3)(b) the value of a property is to be treated as its fair value (determined in accordance with international accounting standards) at whichever of the following times that value is the greatest—
(a) on entry;
(b) when the property was acquired;
(c) the beginning of the accounting period in which the development commenced.
(3A) Subsection (3B) applies in the case of a company (“C”) which is, or is a member of, a UK REIT if—
(a) one or more properties acquired (directly or indirectly) by a relevant UK property rich company have been developed since acquisition,
(b) the cost of the development exceeds 30% of the ... value of the property ...,
(c) C disposes of any of its rights or interests in the relevant UK property rich company,
(d) the disposal is made within the period of 3 years beginning with the completion of the development, and
(e) if C is a member of a UK REIT, the disposal is not to another member of the UK REIT.
(3AA) For the purposes of subsection (3A)(b) the value of a property is to be treated as its fair value (determined in accordance with international accounting standards) at whichever of the following times that value is the greatest—
(a) on entry;
(b) when the property was acquired;
(c) the beginning of the accounting period in which the development commenced.
(3B) If this subsection applies, section 535A is not to apply in relation to so much of the amount of a gain accruing on the disposal as relates to the property which has been developed.
(3C) For the purposes of subsection (3A)—
(a) a company is a “relevant UK property rich company” if, as a result of section 535A, any part of a gain accruing to C on a disposal of a right or interest in the company would not be a chargeable gain, and
(b) a relevant UK property rich company acquires property “indirectly” if property is acquired by someone other than the relevant UK property rich company and the property is taken into account in determining the value of the assets of the relevant UK property rich company.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) 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.
(6) This section has effect in relation to a non-UK member of a group UK REIT as if references to property rental business were references to UK property rental business.
(7) Sections 535, 535A and 535B are relevant to the tax treatment of any gain arising to a company under this section.
(1) Subsection (2) applies if—
(a) an asset has been used wholly and exclusively for the purposes of residual business of a company which is, or is a member of, a UK REIT, and
(b) the asset begins to be used wholly and exclusively for the purposes of the company so far as it carries on property rental business.
(2) The asset is to be treated as having been at that time—
(a) disposed of by the company so far as it carries on residual business, and
(b) immediately reacquired 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 asset.
(4) For the purposes of CAA 2001—
(a) a sale and reacquisition deemed under subsection (2)—
(i) does not give rise to allowances or charges, and
(ii) does not make it possible to make an election under section 198 or 199 of that Act (apportionment),
(b) subsection (3) does not apply, and
(c) anything done by or to the company so far as it carries on residual business before the deemed sale and reacquisition is to be treated after the deemed sale and reacquisition as having been done by or to the company so far as it carries on property rental business.
(5) 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.
(6) This section has effect in relation to a non-UK member of a group UK REIT as if references to property rental business were references to UK property rental business.
(7) Section 535 is relevant to the tax treatment of any gain arising to a company under this section.
(1) This section applies in the case of a company UK REIT if—
(a) the company (“C”) disposes of an asset involved in its property rental business to a 75% subsidiary (“S”) of C,
(b) C (so far as it carries on residual business) disposes of its interest in S to another company (“P”),
(c) on the date when P acquires the interest in S, P gives a notice under section 523 specifying a date that falls within the post-disposal period, and
(d) the group of which S is a member becomes a group UK REIT from the specified date.
(2) “The post-disposal period” means the period of 6 months beginning with the date of the disposal of the asset by C.
(3) P may give a notice under section 523 in accordance with subsection (1)(c) even if it does not expect to meet conditions C, E and F in section 528 throughout accounting period 1.
(4) Sections 536 and 537 (effects of entry) ... do not apply to the group of which S is a member—
(a) in relation to the asset disposed of by C, or
(b) in relation to business conducted by the exploitation of that asset.
(5) Sections 555 and 556 (movement of assets out of ring fence) do not apply to the disposal of the asset by C.
(6) But if, at the end of the post-disposal period, conditions C, E and F in section 528 are not met in relation to P, subsections (4) and (5) are to be treated as not having had effect.
(1) This section applies in relation to a company if each of conditions A to D is met.
(2) Condition A is that the company (“the exiting company”) ceases to be a member of a group UK REIT (“Group 1”).
(3) Condition B is that at the time immediately after it ceases to be a member of Group 1—
(a) the exiting company is a member of another group (“Group 2”) and—
(i) the principal company of Group 2 meets conditions A and B in section 528,
(ii) Group 2 has property rental business in relation to which conditions A and B in section 529 are met,
(iii) the condition in section 530 is met in relation to the principal company of Group 2, and
(iv) Group 2 meets conditions A and B in section 531, or
(b) the exiting company—
(i) meets conditions A and B in section 528,
(ii) has property rental business in relation to which conditions A and B in section 529 are met, and
(iii) meets the condition in section 530 and conditions A and B in section 531.
(4) Condition C is that—
(a) in a case within subsection (3)(a), the principal company of Group 2 gives a notice under section 523 no later than the date on which the exiting company ceases to be a member of Group 1, and
(b) in a case within subsection (3)(b), the exiting company gives a notice under section 524 no later than the date on which it ceases to be a member of Group 1.
(5) Condition D is that the date specified in the notice under section 523 or 524 (as the case may be) is the same as that on which the exiting company ceases to be a member of Group 1.
(6) A company may give a notice under section 523 or 524 in accordance with subsection (4) even if it does not expect to meet conditions C, E and F in section 528 throughout accounting period 1.
(7) If this section applies, the exiting company is to be treated as a member of a group UK REIT (or as a company UK REIT) during the period of 6 months beginning with the time when it ceases to be a member of Group 1.
(8) If this section applies, the following provisions do not have effect—
sections 536 and 537 (effects of entry),
... and
sections 579 and 580 (effects of cessation).
(9) But if, at the end of the period of 6 months mentioned in subsection (7) conditions C, E and F in section 528 are not met in relation to the principal company of Group 2 or the exiting company (as the case may be)—
(a) this section does not apply, and
(b) the exiting company is to be treated as having ceased to be a member of a group UK REIT (or a company UK REIT) on the date on which it ceased to be a member of Group 1.
561 Notice of breach of relevant Chapter 2 condition
(1) The principal company of a group UK REIT must notify an officer of Revenue and Customs as soon as reasonably practicable if a relevant Chapter 2 condition ceases to be met in relation to the principal company or (as the case may be) the group.
(2) A company UK REIT must notify an officer of Revenue and Customs as soon as is reasonably practicable if a relevant Chapter 2 condition ceases to be met in relation to the company.
(3) Each of the following is a “relevant Chapter 2 condition”—
conditions C and D in section 528 (conditions for company),
the condition in section 528A (further condition relating to shares),
the property rental business condition,
the condition in section 530 (distribution of profits), and
conditions A and B in section 531 (balance of business).
(3A) For the purposes of this section, and sections 563 and 575, the “property rental business condition” is met if either conditions A and B or condition C in section 529 (property rental business) are met.
(4) A notification under subsection (1) or (2) must include—
(a) the date on which the condition first ceased to be met and the date (if any) on which it was met again,
(b) a description of the breach, and
(c) details of the steps (if any) taken by the company to prevent a recurrence of the breach.
(5) The following subsections apply in relation to condition D in section 528.
(6) In accordance with section 527(6) and (7), a notification does not have to be given under subsection (1) or (2) if condition D ceases to be met during the first 3-year period.
(7) If condition D is not met at the start of the first day after the end of the first 3-year period, for the purposes of subsections (1) to (4) condition D is treated as having ceased to be met at the start of that day.
(8) In subsections (6) and (7) “the first 3-year period” has the meaning given by section 527(8).
562 Breach of condition C in section 528 (conditions for company)
(1) This section makes provision about cases relating to breaches of condition C in section 528 in relation to—
(a) the principal company of a group UK REIT, or
(b) a company UK REIT.
(2) If condition C is not met—
(a) as a result of the principal company of a group UK REIT becoming a member of another group UK REIT, or
(b) as a result of a company UK REIT becoming a member of a group UK REIT,
the breach is to be ignored.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) If—
(a) condition C is not met in relation to an accounting period, and
(b) the case is not one within subsection (2) ...,
the group or company (as the case may be) is to be treated as having ceased to be a UK REIT at the end of the previous accounting period.
562A Breach of condition D in section 528 (conditions for company)
(1) This section makes provision about cases relating to breaches of condition D in section 528 in relation to—
(a) the principal company of a group UK REIT, or
(b) a company UK REIT.
(2) In accordance with section 527(6) and (7), a breach of condition D during the first 3-year period is to be ignored.
(3) If condition D is not met at the start of the first day after the end of the first 3-year period, the group or company (as the case may be) is to be treated as having ceased to be a UK REIT at the end of the first 3-year period.
(4) If condition D is not met at any time after the start of the day mentioned in subsection (3), the group or company (as the case may be) is to be treated as having ceased to be a UK REIT at—
(a) the end of the accounting period preceding the accounting period in which the breach began, or
(b) if later, the end of the first 3-year period.
(5) Neither subsection (3) nor subsection (4) applies if condition D is not met as a result of—
(a) the principal company of a group UK REIT becoming a member of another group UK REIT, or
(b) a company UK REIT becoming a member of a group UK REIT,
and, accordingly, the breach is to be ignored.
(6) Subsection (4) does not apply if—
(a) condition D is not met as a result of anything done (or not done) by a person other than the company in question, and
(b) the company remedies the breach not later than the end of the accounting period after that in which the breach began,
and, accordingly, the breach is to be ignored.
(7) But if, in a case within subsection (6), the breach of condition D is not remedied by the time mentioned in that subsection, the group or company (as the case may be) is treated as having ceased to be a UK REIT at the end of the accounting period in which the breach began.
(8) In this section “the first 3-year period” has the meaning given by section 527(8).
562B Breach of further condition relating to shares
(1) Subsection (2) applies if the condition in section 528A (further condition relating to shares) is not met in relation to an accounting period.
(2) The group or company (as the case may be) is to be treated as having ceased to be a UK REIT at the end of the previous accounting period.
(3) But subsection (2) does not apply if the condition is not met as a result of—
(a) the principal company of a group UK REIT becoming a member of another group UK REIT, or
(b) a company UK REIT becoming a member of a group UK REIT,
and, accordingly, the breach is to be ignored.
(4) This section is subject to section 562C.
562C Breach of further condition relating to shares in accounting periods 1, 2 and 3
(1) Subsection (2) applies if the condition in section 528A, as relaxed by section 528B, is not met in relation to accounting period 1, accounting period 2 and accounting period 3.
(2) The group or company (as the case may be) is to be treated as having ceased to be a UK REIT at the end of accounting period 2.
(3) But subsection (2) does not apply if the condition, as relaxed, is not met as a result of—
(a) the principal company of a group UK REIT becoming a member of another group UK REIT, or
(b) a company UK REIT becoming a member of a group UK REIT,
and, accordingly, the breach is to be ignored.
(4) In this section “accounting period 2” and “accounting period 3” have the same meaning as in section 528B.
(1) Subsection (2) applies if the property rental business condition (see section 561(3A)) is not met in the case of a UK REIT throughout an accounting period of—
(a) in the case of a group UK REIT, the principal company of the group, and
(b) in the case of a company UK REIT, the company.
(2) The breach is to be ignored.
564 Breach of condition as to distribution of profits
(1) Subsection (2) applies if the condition in section 530 (distribution of profits) is not met in relation to an accounting period.
(2) The breach is to be ignored; but the amount given by section 565 (“the section 565 amount”) is charged to corporation tax under the charge to corporation tax on income.
(3) The section 565 amount is to be treated as profits of residual business—
(a) of the principal company of the group UK REIT, or
(b) of the company UK REIT,
as the case may be.
(4) Accordingly, it is charged to corporation tax at the main rate of corporation tax.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) No loss, deficit, expense or allowance may be set off against the section 565 amount.
(10) In this section and section 565, “ distribution ” is to be read in accordance with section 530(6A) and (6B).
(1) For the purposes of section 564 “the section 565 amount” is found by subtracting D from P.
(2) In the case of a group UK REIT—
P is 90% of the group's UK profits (as defined by section 530(2)) arising in the accounting period, and
D is the gross amount of those profits distributed in respect of the period within —
the deadline set by section 530(1), or
any later deadline set by an officer of Revenue and Customs.
(3) In the case of a company UK REIT—
P is 90% of the company's profits from property rental business arising in the accounting period, and
D is the gross amount of those profits distributed in respect of the accounting period within —
the deadline set by section 530(4), or
any later deadline set by an officer of Revenue of Customs.
(4) The definition of “D” in subsections (2) and (3) needs to be read with section 530A (so far as applicable).
568 Breach of balance of business conditions after accounting period 1
(1) If—
(a) condition A in section 531 (balance of business: profits) is not met in relation to an accounting period other than accounting period 1, but
(b) the profits of property rental business of the UK REIT in question are at least 50% of its aggregate profits for the period,
the breach is to be ignored.
(2) If—
(a) condition B in section 531 (balance of business: assets) is not met in relation to an accounting period other than accounting period 1, but
(b) the sum of the values mentioned in section 531(5)(a) and (b) is at least 50% of the total value of assets held by the UK REIT,
the breach is to be ignored.
(3) Subsections (1) and (2) are to be read in accordance with section 531.
This Chapter is subject to section 572 (under which an officer of Revenue and Customs may terminate the UK REIT status of a group or company in certain circumstances).
(1) This Chapter makes provision about how, and in what circumstances, a group or a company ceases to be a UK REIT.
(2) The UK REIT status of a group or company may be terminated—
(a) by a notice given by the principal company of the group or (as the case may be) by the company (see section 571), or
(b) in the cases set out in sections 573 to 577, by a notice given by an officer of Revenue of Customs (see section 572).
(3) In some circumstances a group or company ceases to be a UK REIT automatically (see section 578).
(4) This Chapter also contains provision about the effects of ceasing to be a UK REIT (see sections 579 to 582).
(1) Subsection (2) applies if—
(a) the principal company of a group UK REIT, or
(b) a company UK REIT,
gives a notice specifying a date at the end of which the group or company is to cease to be a UK REIT.
(2) The group or company ceases to be a UK REIT at the end of that date.
(3) A notice under subsection (1) must be given in writing to an officer of Revenue and Customs.
(4) The date specified in a notice under subsection (1) must be after the date on which the officer receives the notice.
572 Termination by notice: officer of Revenue and Customs
(1) If an officer of Revenue and Customs gives a notice in writing—
(a) to the principal company of a group UK REIT, or
(b) to a company UK REIT,
the group or company ceases to be a UK REIT.
(2) An officer of Revenue and Customs may give a notice under subsection (1) only in a case within section 573, 573A, 573B, 574, 575, 576 or 577.
(3) A notice under subsection (1) must state the reason for it.
(4) If a notice is given under subsection (1)—
(a) the group or company (as the case may be) is to be taken to have ceased to be a UK REIT at the end of the accounting period before the accounting period during which the event occurs (or the last event occurs) which caused the officer to give the notice, and
(b) the company to which the notice is given may appeal.
(5) An appeal under subsection (4)(b) must be made by notice given in writing to an officer of Revenue and Customs during the period of 30 days beginning with the date on which the notice under subsection (1) is given.
(5A) Subsection (4)(a) has effect subject to section 573A(8).
(5B) Subsection (4)(a) has effect subject to section 573B(9).
(6) Section 574(3) modifies subsection (4)(a) for the case described in section 574(2) (breach of condition B in section 531 in accounting period 1).
(1) An officer of Revenue and Customs may give a notice under section 572(1) if the condition in this section is met.
(2) The condition is met in the case of a group UK REIT if, during the relevant 10-year period, two notices have been given under section 545 (cancellation of tax advantage) to members of the group.
(3) The condition is met in the case of a company UK REIT if, during the relevant 10-year period, two notices have been given under section 545 to the company.
(4) “The relevant 10-year period” is the period of 10 years beginning with the day on which the first notice was given under section 545.
573A Notice under section 572: condition D in section 528 not met
(1) An officer of Revenue and Customs may give a notice under section 572(1) if—
(a) at any time during the first 3-year period, condition D in section 528 is not met, and
(b) as at that time, subsection (2) has applied to a member of the group or the company (as the case may be) for a period exceeding 3 years or for a number of periods which in total exceed 3 years.
(2) This subsection applies to a company at any time when—
(a) the company is, or is a member of, a UK REIT,
(b) condition D in section 528 is not met in relation to the UK REIT, and
(c) the first 3-year period in relation to the UK REIT has not ended.
(3) Neither subsection (1)(a) nor subsection (2)(b) covers cases in which condition D in section 528 is not met as a result of—
(a) the principal company of a group UK REIT becoming a member of another group UK REIT, or
(b) a company UK REIT becoming a member of a group UK REIT.
(4) Subsection (5) applies if—
(a) a company ceases to carry on a business (“the transferred business”) which it carried on at a time (“the relevant time”) when subsection (2) applied to the company, and
(b) another company (“company X”) begins to carry on the transferred business.
In paragraph (a) the reference to a business includes a part of a business.
(5) Subsection (2) is to be taken to have applied at the relevant time to the following companies—
(a) company X, and
(b) if company X subsequently ceases to carry on the transferred business (or any part of it), any other companies which from time to time carry on the transferred business (or any part of it).
(6) In this section “the first 3-year period” has the meaning given by section 527(8).
(7) If a notice is given under section 572(1) in a case within this section, subsection (8) applies instead of section 572(4)(a).
(8) The group or company (as the case may be) is to be taken to have ceased to be a UK REIT on—
(a) the first day of accounting period 1, or
(b) such later day as may be specified by the officer of Revenue and Customs in the notice.
573B Notice under section 572: further condition relating to shares not met
(1) In the case of a group UK REIT, an officer of Revenue and Customs may give a notice under section 572(1) if—
(a) the condition in section 528A (further condition relating to shares) would not be met in relation to an accounting period (“the relevant accounting period”) but for section 528B, and
(b) subsection (2) applies to a company which is a member of the group at any time during the relevant accounting period.
(2) This subsection applies to a company if it has benefited from the relaxation of the condition in section 528A in relation to 3 or more accounting periods (apart from the relevant accounting period).
(3) In the case of a company UK REIT, an officer of Revenue and Customs may give a notice under section 572(1) if—
(a) the condition in section 528A (further condition relating to shares) would not be met in relation to an accounting period (“the relevant accounting period”) but for section 528B, and
(b) the company has benefited from the relaxation of the condition in section 528A in relation to 3 or more accounting periods (apart from the relevant accounting period).
(4) For the purposes of this section a company benefits from the relaxation of the condition in section 528A if—
(a) it is a member of a group UK REIT at any time during an accounting period in relation to which the condition in section 528A would not be met but for section 528B, or
(b) at any time it is a company UK REIT and the condition in section 528A would not be met in relation to an accounting period but for section 528B,
and the accounting period “in relation to” which the company benefits from the relaxation of the condition in section 528A is the accounting period mentioned in paragraph (a) or (b) (as the case may be).
(5) None of subsections (1)(a), (3)(a), (4)(a) and (4)(b) covers cases in which the condition in section 528A would not be met as a result of—
(a) the principal company of a group UK REIT becoming a member of another group UK REIT, or
(b) a company UK REIT becoming a member of a group UK REIT.
(6) Subsection (7) applies if—
(a) a company ceases to carry on a business (“the transferred business”) which it carried on at any time during an accounting period in relation to which the company benefits from the relaxation of the condition in section 528A, and
(b) another company (“company X”) begins to carry on the transferred business.
In paragraph (a) the reference to a business includes a part of a business.
(7) The following companies are to be taken to benefit from the relaxation of the condition in section 528A in relation to the accounting period in question—
(a) company X, and
(b) if company X subsequently ceases to carry on the transferred business (or any part of it), any other companies which from time to time carry on the transferred business (or any part of it).
(8) If a notice is given under section 572(1) in a case within this section, subsection (9) applies instead of section 572(4)(a).
(9) The group or company (as the case may be) is to be taken to have ceased to be a UK REIT on—
(a) the first day of accounting period 1, or
(b) such later day as may be specified by the officer of Revenue and Customs in the notice.
(1) An officer of Revenue and Customs may give a notice under section 572(1) if the officer thinks that—
(a) a breach of a condition in section 529, 530 or 531, or
(b) an attempt by a member of the group or (as the case may be) by the company to obtain a tax advantage,
is so serious that the group or company should cease to be a UK REIT.
(2) Subsection (3) applies if—
(a) the case is one relating to a breach of condition B in section 531 (balance of business: assets) in relation to accounting period 1, and
(b) that condition is not met at the beginning of the next accounting period.
(3) In that case, section 572(4) has effect as if for paragraph (a) there were substituted—
(a) the group or company (as the case may be) is to be taken to have ceased to be a UK REIT on the first day of accounting period 1, and
575 Notice under section 572: breach of conditions as to property rental business
(1) An officer of Revenue and Customs may give a notice under section 572(1) if, in 3 consecutive accounting periods, there is a breach of the property rental business condition (see section 561(3A)).
(2) An officer of Revenue and Customs may also give a notice under section 572(1) if, during the relevant 10-year period, section 563(2) has been relied on—
(a) more than twice in relation to condition A in section 529, ...
(b) more than twice in relation to condition B in that section , or
(c) more than twice in relation to Condition C in that section.
(3) “The relevant 10-year period” is the period of 10 years beginning with the first day on which section 563(2) was relied on.
(4) The following rules apply for the purposes of subsection (2)—
Rule 1 If a breach of condition B in section 529 is a necessary consequence of a breach of condition A in that section in the same accounting period, the breach of condition B is to be ignored (and accordingly the UK REIT is not to be treated as having relied on section 563(2) in relation to the breach of condition B).
Rule 2 If a breach of the property rental business condition lasts for—
more than one accounting period, but
not more than two accounting periods,
the UK REIT is to be treated as having relied on section 563(2) only once.
576 Notice under section 572: breach of conditions as to balance of business
(1) An officer of Revenue and Customs may give a notice under section 572(1) if there is a breach of condition A or B in section 531 (balance of business) in 3 consecutive accounting periods.
(2) An officer of Revenue and Customs may also give a notice under section 572(1) if, during the relevant 10-year period, either subsection (1) or (2) of section 568 has been relied on more than twice.
(3) “The relevant 10-year period” is the period of 10 years beginning with the first day on which subsection (1) or (as the case may be) subsection (2) of section 568 was relied on.
(4) In the case of a breach of condition A in section 531, section 568(1) is to be treated for the purposes of subsection (3) as having first been relied on on the last day of the accounting period in which profits are assessed for the purposes of that condition.
(5) If a breach of condition A or B in section 531 lasts for—
(a) more than one accounting period, but
(b) not more than two accounting periods,
the UK REIT is to be treated for the purposes of subsection (2) as having relied on section 568(1) or (2) (as the case may be) only once.
(6) References in this section to an accounting period do not include a reference to accounting period 1.
577 Notice under section 572: multiple breaches of conditions in Chapter 2
(1) An officer of Revenue and Customs may give a notice under section 572(1) if conditions A, B and C are met.
(2) Condition A is that at least two of the conditions in sections 528 to 531 have been breached during the relevant 10-year period.
(3) Condition B is that the breached conditions are not both (or all) contained in the same section; and for this purpose the condition in section 530 (distribution of profits) is to be treated as contained in section 529.
(4) Condition C is that the UK REIT has relied on some or all of the provisions mentioned in subsection (5)(a) more than 4 times (in total) during the relevant 10-year period.
(5) For the purposes of this section—
(a) the provisions referred to in subsection (4) are—
section 562A(6) ,
section 563(2), and
section 568(1) and (2), and
(b) “the relevant 10-year period” is the period of 10 years beginning with the day on which the first of the conditions to be breached was first breached.
(6) If the first of the conditions to be breached is condition A in section 531 (balance of business: profits), that condition is to be treated for the purposes of subsection (5)(b) as breached from the last day of the accounting period in which profits are assessed for the purposes of the condition.
(7) For the purposes of this section the following breaches are to be ignored—
(a) a breach of condition C or D in section 528 (conditions for company) occurring as a result of—
(i) a member of a group UK REIT becoming a member of another group UK REIT, or
(ii) a company UK REIT becoming a member of a group UK REIT,
(b) a breach of condition C ... in section 528 in respect of which section 525(2) to (4) ... applies,
(c) a breach of any of conditions C, E and F in section 528 in respect of which section 558(3) or 559(6) applies,
(d) a breach of condition A in section 531 in accounting period 1, and
(e) a breach of condition B in section 531 at the beginning of that period.
(8) In accordance with section 527(6) and (7), a breach of condition D in section 528 during the first 3-year period (as defined in section 527(8)) is also to be ignored for the purposes of this section.