Schedule 19 | Real estate investment trusts: UK REITs which invest in other UK REITs

(1)Part 12 of CTA 2010 (real estate investment trusts) is amended as follows.

(1)Section 530 (condition as to distribution of profits) is amended as follows.

(2)For subsection (1) substitute—

(1)In the case of a group UK REIT, the condition in this section is met in relation to an accounting period if—

(a)so much of the group's UK profits arising in the period as are UK REIT investment profits (see section 549A), and

(b)at least 90% of the rest of the group's UK profits arising in the period,

are distributed by the principal company of the group on or before the filing date for the principal company's tax return for the period (see paragraph 14 of Schedule 18 to FA 1998).

(3)For subsection (4) substitute—

(4)In the case of a company UK REIT, the condition in this section is met in relation to an accounting period if—

(a)so much of the profits of the company's property rental business arising in the period as are UK REIT investment profits (see section 549A), and

(b)at least 90% of the rest of the profits of the company's property rental business arising in the period,

are distributed on or before the filing date for the company's tax return for the period (see paragraph 14 of Schedule 18 to FA 1998).

(4A)For the purposes of subsection (4) profits of the company's property rental business are to be calculated in accordance with section 599.

(1)Section 530A (condition as to distribution of profits: increase in profits after delivery of tax return) is amended as follows.

(2)In subsection (2) for “530(1)(c)” substitute “ 530(1) ”.

(3)In subsection (6) for “530(4)(b)” substitute “ 530(4) ”.

(4)After subsection (9) insert—

(10)This section cannot be relied upon to satisfy the requirement of section 530(1)(a) or (4)(a).

(1)Section 531 (conditions as to balance of business) is amended as follows.

(2)After subsection (4) insert—

(4A)In the case of a group, for the purposes of subsections (1) and (2) a distribution falling within section 549A(6) or (8) received by a member of the group is to be treated as profits of a property rental business in accordance with section 549A(1) notwithstanding section 549A(5).

(4B)In the case of a company, for the purposes of subsections (1) and (3) a distribution falling within section 549A(6) or (8) received by the company is to be treated as profits of a property rental business in accordance with section 549A(1) notwithstanding section 549A(5).

(3)In subsection (5)(b) after “cash” insert “ or relevant UK REIT shares ”.

(4)In subsection (6)(b) after “cash” insert “ and relevant UK REIT shares ”.

(5)After subsection (8) insert—

(9)In this section “relevant UK REIT shares” means—

(a)in the case of a group UK REIT, shares held by a member of the group in the principal company of another group UK REIT or in a company UK REIT, and

(b)in the case of a company UK REIT, shares held by the company in the principal company of a group UK REIT or in another company UK REIT.

(1)Section 548 (distributions: liability to tax) is amended as follows.

(2)In subsection (5) after “2009)” insert “ so far as the distribution is a distribution of exempt profits ”.

(3)In subsection (6) after “2005)” insert “ so far as the distribution is a distribution of exempt profits ”.

(4)After subsection (8) insert—

(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 549 (distributions: supplementary) is amended as follows.

(2)In subsection (2A) after “shareholder” insert “ so far as they are distributions of exempt profits ”.^F1

(3)After subsection (3) insert—

(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)In subsection (4) after the first “shareholder” insert “ (so far as they are distributions of exempt profits) ”.

(7)After section 549 insert—

549ADistributions 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.

(8)In section 550 (attribution of distributions) in subsection (2)—

(a)for paragraph (a) substitute—

(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)in paragraph (b) for “second” substitute “ third ”,

(c)in paragraph (c) for “third” substitute “ fourth ”,

(d)in paragraph (d) for “fourth” substitute “ fifth ”, and

(e)in paragraph (e) for “fifth” substitute “ sixth ”.

(9)In section 588 (joint ventures: effect of notice under section 586) after subsection (6) insert—

(7)Subsections (3) to (6) apply (in particular) for the purpose of interpreting section 549A(6)(a)(i) and (8)(a)(i).

(10)In section 589 (joint ventures: effect of notice under section 587) after subsection (6) insert—

(7)Subsections (3) to (6) apply (in particular) for the purpose of interpreting section 549A(6)(a)(i) and (8)(a)(i).

(11)In section 605 (property rental business: exclusion of business producing listed income) after subsection (1) insert—

(1A)But see section 549A which treats income falling within class 7 of the table as profits of property rental business.

(12)In Chapter 18 of Part 15 of ITA 2007 (deduction of income tax at source) in sections 973 and 974 (which relate to distributions made by UK REITs) after subsection (6) insert—

(7)In relation to references to profits of property rental business, see section 549A of CTA 2010.

(1)The amendments made by paragraph 4(3) to (5) above have effect for accounting periods beginning on or after the day on which this Act is passed.

(2)Subject to what follows, the amendments made by paragraphs 5 to 7 above have effect in relation to distributions received on or after the day on which this Act is passed.

(3)A distribution received by a member of a group UK REIT does not fall within section 549A(6) or (8) of CTA 2010 if it is received in an accounting period of the principal company of the group beginning before the day on which this Act is passed.

(4)A distribution received by a company UK REIT does not fall within section 549A(6) or (8) of CTA 2010 if it is received in an accounting period of the company beginning before the day on which this Act is passed.