IFM26030 | Real Estate Investment Trust : Leaving the regime: automatic termination: CTA2010/S578

If a company or a principal company of a group REIT does not meet Company conditions A, B, E or F of CTA2010/S528 in an accounting period, it automatically leaves the regime (CTA2010/S578). Unlike all of the other conditions of the regime, there are no provisions that can be relied on to remain in the regime if these Company conditions are breached.

Where a company/principal company has breached one of these conditions, the regime will, in general, cease to apply from the end of the accounting period before the breach occurs. The exception is where the company / group has been a UK-REIT for less than ten years – in which case HMRC can direct that a different date of cessation applies (see IFM26045).

The events that result in automatic termination are:

• ceasing to be solely UK resident for tax purposes

• becoming an open-ended investment company

• issuing a new class of ordinary shares or any other type of share apart from non-voting restricted preference shares (as defined in CTA2010/S160), and

• borrowing money on terms that effectively entitle the lender to a share of the profits or otherwise breach the requirements of CTA2010/S528(8) (see IFM22015).

Where any of these events occur, the company/principal company is required to notify HMRC that it no longer meets the condition as soon as reasonably practicable.