Finance Act 2006

108 Conditions for balance of business E+W+S+N.I.

(1) In order to be a company to which this Part applies in respect of an accounting period Conditions 1 and 2 below must be satisfied in respect of the company.

(2) Condition 1 is that in the accounting period the profits arising from tax-exempt business are at least 75% of the company's total profits; and for that purpose—

(a) “total profits” means profits arising from tax-exempt business plus profits arising from non-tax-exempt business, and

[F1 (b) “profits” means profits before deduction of tax, calculated in accordance with international accounting standards and excluding—

(i) realised and unrealised gains and losses on the disposal of property,

(ii) changes in the fair value of hedging derivative contracts (within the meaning of section 120(4)), and

(iii) items which are outside the ordinary course of the company's business (irrespective of their treatment in the company's accounts), having regard to that company's past transactions.]

F1 (3) Condition 2 is that at the beginning of the accounting period the value of the assets involved in tax-exempt business is at least 75% of the total value of assets held by the company; and for that purpose—

(a) an asset is involved in tax-exempt business if it is property involved in the relevant property rental business within the meaning given by section 107(6)(a),

(b) assets must be valued in accordance with international accounting standards,

(c) where international accounting standards offer a choice of valuation between cost basis and fair value, fair value must be used, and

(d) no account shall be taken of liabilities secured against or otherwise relating to assets (whether generally or specifically).

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Amendments (Textual)

F1 S. 108(2)(b) substituted (with effect as mentioned in s. 52(2) of the amending Act) by Finance Act 2007 (c. 11), s. 52, Sch. 17 para. 4

Modifications etc. (not altering text)

C1 S. 108 modified (31.12.2007) by The Real Estate Investment Trusts (Joint Venture Groups) Regulations 2007 (S.I. 2007/3425), reg. 20(4)