Corporation Tax Act 2010

567 Meaning of “the notional amount”

(1) For the purposes of section 566 “the notional amount” is found by taking two steps.

(2) Step 1: find the amount obtained by the calculation—

(3) TMV is—

(a) in the case of a group UK REIT, the total market value of assets involved in—

(i) property rental business of UK members of the group, and

(ii) UK property rental business of non-UK members of the group, and

(b) in the case of a company UK REIT, the total market value of assets involved in property rental business of the company.

(4) For the purposes of subsection (3)—

(a) the market value of assets is to be determined as at the end of accounting period 1,

(b) any asset of negative market value is to be ignored, and

(c) if a percentage of the assets of a member of a group UK REIT is excluded from a financial statement in accordance with section 533(3), that percentage of those assets is to be ignored in determining the market value of assets involved in property rental business (or, as the case may be, UK property rental business) of the member.

(5) TR is the percentage rate at which the principal company of the group or (as the case may be) the company is chargeable to corporation tax on profits in respect of residual business (see section 534(3)).

(6) Step 2: subtract the entry charge notional income from the amount obtained by step 1.

(7) In step 2 “entry charge notional income” means—

(a) in the case of a group UK REIT, the sum of the amounts of notional income treated as arising under section 538 to members of the group, and

(b) in the case of a company UK REIT, the amount of notional income treated as arising to the company under section 538.

(8) But the entry charge notional income is reduced in accordance with the calculation in subsection (9) if—

(a) in the case of a group UK REIT, an asset held at the beginning of accounting period 1 by a company which is a member of the group, and

(b) in the case of a company UK REIT, an asset held by the company at the beginning of accounting period 1,

is disposed of by the company during that period.

(9) The calculation referred to in subsection (8) is—

where—

• AMV is the market value of the asset at entry,

• MV has the same meaning as in section 539(3), and

• NI is the amount of notional income treated as arising to the company under section 538.