Section 530: Condition as to distribution of profits
1642.This section sets out the distribution condition which needs to be satisfied by the principal company of a group or, in the non-group case, by a company. It is based on section 107(8) and (9) of, and paragraphs 6(4) and (5) and 32(8) of Schedule 17 to, FA 2006.
1643.Subsection (1) provides that, in relation to an accounting period of the principal company, the principal company must distribute at least 90% of the group’s “UK profits”.
1644.Subsection (2) defines “UK profits” as the sum of the profits shown in the financial statements under section 532(2)(b). Section 532(3) provides that this is the sum of the profits arising from the property rental business of the UK members of the group together with the profits arising from UK property rental business carried on by non-UK companies. Section 533(3) confirms that if a non-member of the group holds a percentage of the beneficial interest in a member of a group, that percentage is excluded from the financial statements and so also from the calculation of profits which this section requires to be distributed.
1645.Subsection (4) provides that, in relation to an accounting period of a company, the company must distribute at least 90% of profits of the company’s property rental business.
1646.The distribution requirement in this section also applies to the relevant proportion of profits generated by joint venture companies (regulations 6(1) and 10(3) of SI 2006/2866). See section 588(1)which treats a joint venture company as a member of the group UK REIT and section 588(2) which treats a company UK REIT and a joint venture company as forming a group UK REIT.
1647.The requirement to distribute at least 90% of the group’s “UK profits”, or “profits” in the case of a company UK REIT, does not extend to chargeable gains. This contrasts with section 121 of FA 2006, rewritten in section 548 (distribution treated as UK property business income in hands of shareholder) and section 973 of ITA (deduction of sums representing income tax at source) which apply to profits and gains of property rental business (or UK property rental business in the case of non-UK companies).
