IFM28040 | Real Estate Investment Trust : Distributions: attribution rules: category (e) – other: CTA2010/S550(2)(e)

If there is a balance remaining after attributing the distribution to Categories (a) to (d) (see IFM28035), the remaining part of the distribution is out of other income, gains and anything else that is included in distributable reserves.

Example 7

The facts are as in Example 6 (see IFM28035) but C decides to distribute 1,600 in March 2018 attributed wholly to 2017 profits.

The next step is as in Example 6. Taxable income (b) is 130, property rental business income (c) 90, relevant non-chargeable gains (d) 180 b/f + 70 and other (e) is 320 b/f , as before.

The final step is to attribute the 1,600 distribution by reference to the five categories. The first 100 is Category (a) and 810 is category (aa), total 910 is a PID payable under deduction of basic rate tax (other than for gross payment cases – see IFM28125). C decides to attribute nothing to Category (b) (taxable income) (but see below).

C has no choice about the balance of 700. This is attributed first to Category (c), property rental business income, up to the amount in the pot (90). This amount is a PID and payable under deduction of basic rate tax (other than for gross payment cases).

The balance of 600 is then attributed to Category (d), relevant non-chargeable gains, up to the amount in the relevant non-chargeable gains pot (250). The next 250 of the distribution is therefore a PID, attributed to Category (d) and payable under deduction of tax (other than for gross payment cases).

The balance of 350 is then attributed to Category (e), other, up to the amount in the other Category (320). This is a normal dividend, payable gross.

That leaves 30 not yet attributed. The only other pot with anything left in it is taxable income (b), so C has to revisit the decision in the second step and must, if it wants to distribute 1,600, attribute some to Category (b). This remaining 30 is therefore attributable to (b) taxable income and is a normal dividend, payable gross.

The 100 distributable reserves to carry forward is therefore all (b) taxable income, and the other elements of the pot are all zero.

This table summarises the position: