Part 4 Real Estate Investment Trusts

Capital gains

125 Movement 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—

where—

(a)

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

(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

(c)

Tax Paid means tax paid under section 112.