1612.This section provides that, in order to be a “group UK REIT”, the principal company of the group must give notice of entering the UK REIT regime. It is based on sections 106, 109 and 134 of, and paragraphs 5(1) and 8(1) of Schedule 17 to, FA 2006.
1613.Subsections (1) and (2) provide that a group of companies may give notice for the UK REIT regime to apply from a specified date. If a group notice is given, all 75% subsidiaries of the group (as defined in section 606) are included in the UK REIT regime. A new accounting period of each company in the group starts on the specified date (see section 536(5)). That new accounting period is called “accounting period 1” – see section 609.
1614.Subsection (3) provides that the principal company of a group may give notice only if it is a “UK company” as defined in section 521 and it is not an OEIC.
1615.It is unclear from the source legislation (in particular sections 106(2), 107(1) and 108(1) of FA 2006) whether a group becomes a UK REIT from the date specified in a section 109 of FA 2006 notice or when the various conditions set out in sections 106(2), 107(1) and 108(1) of FA 2006 are satisfied. Subsection (4) addresses this by making it clear that a group becomes a UK REIT from the date specified in the notice given under this section.
1616.Subsection (5) defines“group UK REIT” as being a group which has given notice under this section.
1617.Section 103(3) of FA 2006, which provides that “a company or group to which this Part applies may be referred to as a Real Estate Investment Trust”, is not rewritten as this expression is not used elsewhere in the legislation.
1618.Subsection (6) makes clear that merely giving a notice is not enough: the group must also meet the conditions in section 527.
1619.This section provides that, in order to be a “company UK REIT”, the company must give notice of entering the UK REIT regime. It is based on sections 106 and 109 of FA 2006.
1620.Subsections (1) and (2) provide that a company may give notice for the UK REIT regime to apply from a specified date. A new accounting period of the company starts on the specified date (see section 536(5)). That new accounting period is called “accounting period 1” – see section 609.
1621.It is possible for a company with a 75% subsidiary to give notice under subsection (3) on its own, in which case none of its 75% subsidiaries is included in the UK REIT regime.
1622.If a company UK REIT gives notice under this section and subsequently wants an existing 75% subsidiary to be brought within the regime, a group notice under section 523 needs to be given. The new notice must comply with all the requirements of section 525.
1623.If a company UK REIT gives notice under section 586(2) for a joint venture company to be treated as forming a group UK REIT with the company UK REIT, the notice does not cause any 75% subsidiaries of the company UK REIT to be brought within the regime.
1624.Subsection (3) provides that a company may give notice only if it is a “UK company” as defined in section 521 and it is not an OEIC.
1625.It is unclear from the source legislation (in particular sections 106(2), 107(1) and 108(1) of FA 2006) whether a company becomes a UK REIT from the date specified in a section 109 of FA 2006 notice or when the various conditions set out in sections 106(2), 107(1) and 108(1) of FA 2006 are satisfied. Subsection (4) addresses this by making it clear that a group becomes a UK REIT from the date specified in the notice given under this section.
1626.Subsection (5) defines“company UK REIT” as being a company which has given notice under this section.
1627.Section 103(3) of FA 2006, which provides that “a company or group to which this Part applies may be referred to as a Real Estate Investment Trust”, is not rewritten as this expression is not used elsewhere in the legislation.
1628.Subsection (6) makes clear that merely giving a notice is not enough: the company must also meet the conditions in section 527.
1629.This section makes supplemental provision about a notice given under section 523 or 524. It is based on sections 109(2) to (5) and 134(1) of, and paragraph 8(2) of Schedule 17 to, FA 2006.
1630.Subsection (1) lists what the principal company of a group or a single company must provide in order to give a valid notice under section 523 or 524.
1631.Subsection (1)(a) requires the notice to be given in writing to “an officer of Revenue and Customs” rather than to “the Commissionersfor Her Majesty’s Revenue and Customs”. See Change 5 in Annex 1.
1632.This section provides that once a group or single company becomes a UK REIT, it continues to be a UK REIT until the regime ceases in accordance with section 571, 572 or 578. It is based on sections 110 and 134(1) of, and paragraph 4 of Schedule 17 to, FA 2006.
1633.This section makes it clear that once a notice under section 523 or 524 has been given, the principal company of a group, or the company, must meet the conditions set out in the remainder of this Chapter in relation to all accounting periods. It is based on sections 106 to 108 and 134 of, and Schedule 17 to, FA 2006.
1634.Subsection (2)(e) provides that the principal company must prepare and submit financial statements to “an officer of Revenue and Customs” rather than to “the Commissionersfor Her Majesty’s Revenue and Customs”. See Change 5 in Annex 1.
1635.This section sets out the conditions which the principal company of a group or, in the non-group case, the company, must meet throughout each accounting period. It is based on section 106(3) to (9) of, and paragraph 3(1) of Schedule 17 to, FA 2006.
1636.This section sets out the conditions which need to be satisfied by a group or company in respect of its property rental business. It is based on sections 107(1), (3), (4) and (6), of, and paragraph 6(1) of Schedule 17 to, FA 2006.
1637.Subsections (1) and (2) provide that the “property rental business” (defined in section 519) must comprise at least three properties with no single property accounting for more than 40% of the total value of the properties involved in the business.
1638.Subsection (3) provides that, for the purposes of this section, the property rental business of a group is treated as single business.
1639.For the purposes of the conditions in subsections (1) and (2), all worldwide properties of non-UK companies are taken into account. This is because paragraph 6(1) of Schedule 17 to FA 2006 provides that “for the purposes of section 107(1) the property rental businesses of the members of the group shall be treated as a single business”.
1640.Paragraph 32(2) of Schedule 17 to FA 2006 provides that “business carried on by a non-UK resident company is property rental business for the purposes of this Part if the business would be property rental business within the meaning given by section 104 [of FA 2006] if it were carried on by a UK resident company”. So the property rental business includes the worldwide property rental business of non-UK companies. By including the worldwide property rental business of non-UK companies, condition A in section 529 is easier to satisfy. But condition B in section 529 may, depending on the circumstances, be more difficult to satisfy, for example where a non-UK company has an overseas property worth more than 40% of the total value of the properties involved in the property rental business.
1641.Subsection (5) excludes a percentage of the property rental business carried on by a subsidiary which is not wholly owned by the group UK REIT. The percentage is the percentage of the business excluded from the financial statements in accordance with section 533. See Change 42 in Annex 1.
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).
1648.This section sets out the balance of business conditions which need to be satisfied by a group or company. It is based on sections 108(2) and (3) and 134(1) of, and paragraphs 4 and 7 of Schedule 17 to, FA 2006.
1649.Subsection (1) provides that at least 75% of the “aggregate profits” of the group or company must relate to property rental business. “Aggregate profits” is defined in subsection (2) for groups and subsection (3) for companies.
1650.It is not clear from the source legislation whether the balance of business tests should include the worldwide profits and assets of non-UK companies. This section includes the worldwide profits and assets of non-UK companies for the purposes of the balance of business tests.
1651.The balance of business test in this section includes the relevant proportion of property rental business of a joint venture company. See section 588(1)which treats a joint venture company as a member of a group UK REIT and section 588(2) which treats a company UK REIT and a joint venture company as forming a group UK REIT.
1652.This section sets out the requirements which need to be satisfied for the purposes of section 527(2)(e). It is based on paragraphs 3(3), 31(2) and 32(8) of Schedule 17 to FA 2006.
1653.According to paragraph 32(2) of Schedule 17 to FA 2006:
“business carried on by a non-UK resident company is property rental business for the purposes of the Part if the business would be property rental business … if it were carried on by a UK resident company”
1654.It follows that a financial statement required byparagraph 31(2)(a) of Schedule 17 to FA 2006 includes theworldwide property rental business of a non-resident company. This is consistent with the rule about the profits and gains of a UK property rental business in paragraph 32(8)(d) of Schedule 17 to FA 2006.
1655.So subsection (2)(a) provides that the financial statements should include the worldwide property rental business of the group.
1656.Subsection (2)(b) provides that the principal company must prepare financial statements for the group’s property rental business in the United Kingdom. Subsection (3) defines the group’s property rental business in the United Kingdom as property rental business carried on by UK companies and UK property rental business of non-UK companies.
1657.Subsection (2)(c) provides that the principal company must prepare financial statements for the group’s residual business. Financial statements under subsection(2)(c) relate to all business which is not property rental business. For non-UK companies “residual business” includesworldwidebusiness which is not property rental business.
1658.The requirement to prepare financial statements under subsection (2)(a) and (b) also applies to venturing companies and venturing groups (defined in section 585) and the relevant percentage of profits of property rental business of the joint venture company. 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.
1659.Financial statements under this section exclude any “non-member percentage” (that is, any percentage of the beneficial interest in a member of the group held by a non-member) – see section 533(3).
1660.This section sets out further requirements about the preparation of financial statements under section 532 and also contains a regulation-making power. It is based on paragraphs 31(3) to (7) and 32(8) of Schedule 17 to FA 2006.
1661.In subsection (4) the expression “equity holder” is not governed by the special definition in section 598.
1662.Subsection (5)(c) provides that the Commissioners may make regulations specifying the deadline for submitting a financial statement to an officer of Revenue and Customs. The section refers to an “an officer of Revenue and Customs” in subsection (5)(c) rather than to “the Commissioners”. See Change 5 in Annex 1.