Part 4Real Estate Investment Trusts

Capital gains

125Movement of assets out of ring-fence

1

Subsection (2) applies when an asset which has been used wholly and exclusively for the purposes of the business of C (tax-exempt) begins to be used (otherwise than by being disposed of in the course of trade) wholly and exclusively for the purposes of the business of C (residual).

2

The asset shall be treated as having been at that time—

a

disposed of by C (tax-exempt), and

b

immediately re-acquired by C (residual).

3

The sale and re-acquisition deemed under subsection (2) shall be treated as being for a consideration equal to the market value of the asset.

4

For the purposes of CAA 2001—

a

the sale and re-acquisition deemed under subsection (2)—

i

shall not give rise to allowances or charges, and

ii

shall not make it possible to make an election under section 198 or 199 of that Act (apportionment),

b

subsection (3) above shall not apply, and

c

anything done by or to C (tax-exempt) before the deemed sale and re-acquisition shall be treated after the deemed sale and re-acquisition as having been done by or to C (residual).

5

Subsection (6) applies when an asset which has been used wholly and exclusively for the purposes of the business of C (tax-exempt) is disposed of in the course of trade for the purposes of the business of C (residual).

6

Where this subsection applies—

a

the deemed sale and re-acquisition under section 111(2) shall be disregarded, and

b

the asset shall be treated as having been disposed of in the course of the business of C (residual).

7

Subsection (6) shall be taken to apply, in particular, where—

a

a property acquired by a company to which this Part applies has been developed since acquisition,

b

the cost of the development exceeds 30% of the fair value of the property (determined in accordance with international accounting standards) at entry or at acquisition, whichever is the later, and

c

the company disposes of the property within the period of three years beginning with the completion of the development.

8

Where subsection (6) applies in relation to an asset held at entry, the company may make a claim for repayment of a proportion of the tax paid under section 112 calculated as follows—

AssetMarketValueAggregateMarketValue×TaxPaidmath

where—

  1. a

    Asset Market Value means market value of the asset at entry,

  2. b

    Aggregate Market Value means the aggregate market value of assets treated as sold and re-acquired under section 111(2) (ignoring any asset of negative market value), and

  3. c

    Tax Paid means tax paid under section 112.