IFM27070 | Real Estate Investment Trust : Breaches of conditions: multiple breaches: example

This example looks at how multiple breach rules for one or more conditions interact. For detail on the multiple breach rules, see IFM27065.

Example

Company C is a UK-REIT, with an accounting date of 31 December. It has the following history of breaching conditions after joining the regime on 1 January 2007.

1. C breaches the Balance of business income test (condition A) for accounting periods ending 31 December 2008 and 2011 (two separate breaches).

2. C breaches the Balance of business asset test (condition B) at the start of accounting periods ending 31 December 2010 and 2016 (two separate breaches).

3. It fails property rental business condition A for accounting period ending 31 December 2017.

Breaches (1) and (2) are both in CTA 2010/S531 (Balance of business income and assets tests), so CTA2010/S576 applies. In the ten-year period beginning on 1 January 2008, C has breached each of the two conditions twice, so can remain in the regime provided C does not breach either condition again before 1 January 2018.

Breach (3) is in section CTA2010/S529 (condition A) which is in a different section from the previous breaches (all four were in CTA2010/S531). The multiple breach rules will apply if the failures are within a ten-year period. This begins with the first breach (1), on 1 January 2008 and runs to 31 December 2017.

C has therefore breached regime conditions on five occasions in ten years. HMRC may issue a termination notice under CTA2010/S572, specifying multiple breaches of separate conditions as the reason. Termination will be with effect from 31 December 2016, being the end of the accounting period before the last event that triggered the notice.