Section 543 | Profit: financing-cost ratio

(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) .^F1

(2)The calculation is—

(3)The excess is charged to corporation tax in relation to the accounting period under the charge to corporation tax on income.^F2

(3A)“The excess” means—^F2

(a)the amount equal to—^F2

(i)PFC, minus^F2

(ii)the property financing costs which would cause the calculation in subsection (2) to equal 1.25 for the accounting period, or^F2

(b)if less, the amount equal to 20% of PP.^F2

(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.^F3

(5)Repealed^F4

(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).