Part 12Real Estate Investment Trusts
Chapter 8Breach of conditions in Chapter 2
561Notice of breach of relevant Chapter 2 condition
1
The principal company of a group UK REIT must notify an officer of Revenue and Customs as soon as reasonably practicable if a relevant Chapter 2 condition ceases to be met in relation to the principal company or (as the case may be) the group.
2
A company UK REIT must notify an officer of Revenue and Customs as soon as is reasonably practicable if a relevant Chapter 2 condition ceases to be met in relation to the company.
3
Each of the following is a “relevant Chapter 2 condition”—
conditions C and D in section 528 (conditions for company),
F5the condition in section 528A (further condition relating to shares),
conditions A and B in section 529 (property rental business),
the condition in section 530 (distribution of profits), and
conditions A and B in section 531 (balance of business).
4
A notification under subsection (1) or (2) must include—
a
the date on which the condition first ceased to be met and the date (if any) on which it was met again,
b
a description of the breach, and
c
details of the steps (if any) taken by the company to prevent a recurrence of the breach.
F45
The following subsections apply in relation to condition D in section 528.
6
In accordance with section 527(6) and (7), a notification does not have to be given under subsection (1) or (2) if condition D ceases to be met during the first 3-year period.
7
If condition D is not met at the start of the first day after the end of the first 3-year period, for the purposes of subsections (1) to (4) condition D is treated as having ceased to be met at the start of that day.
8
In subsections (6) and (7) “the first 3-year period” has the meaning given by section 527(8).
562Breach of F6condition C in section 528 (conditions for company)
1
This section makes provision about cases relating to breaches of condition C F7in section 528 in relation to—
a
the principal company of a group UK REIT, or
b
a company UK REIT.
2
If F8condition C is not met—
a
as a result of the principal company of a group UK REIT becoming a member of another group UK REIT, or
b
as a result of a company UK REIT becoming a member of a group UK REIT,
the F9breach is to be ignored.
F103
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F104
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5
If—
a
F11condition C is not met in relation to an accounting period, and
b
the case is not one within subsection (2) F12...,
the group or company (as the case may be) is to be treated as having ceased to be a UK REIT at the end of the previous accounting period.
562AF2Breach of condition D in section 528 (conditions for company)
1
This section makes provision about cases relating to breaches of condition D in section 528 in relation to—
a
the principal company of a group UK REIT, or
b
a company UK REIT.
2
In accordance with section 527(6) and (7), a breach of condition D during the first 3-year period is to be ignored.
3
If condition D is not met at the start of the first day after the end of the first 3-year period, the group or company (as the case may be) is to be treated as having ceased to be a UK REIT at the end of the first 3-year period.
4
If condition D is not met at any time after the start of the day mentioned in subsection (3), the group or company (as the case may be) is to be treated as having ceased to be a UK REIT at—
a
the end of the accounting period preceding the accounting period in which the breach began, or
b
if later, the end of the first 3-year period.
5
Neither subsection (3) nor subsection (4) applies if condition D is not met as a result of—
a
the principal company of a group UK REIT becoming a member of another group UK REIT, or
b
a company UK REIT becoming a member of a group UK REIT,
and, accordingly, the breach is to be ignored.
6
Subsection (4) does not apply if—
a
condition D is not met as a result of anything done (or not done) by a person other than the company in question, and
b
the company remedies the breach not later than the end of the accounting period after that in which the breach began,
and, accordingly, the breach is to be ignored.
7
But if, in a case within subsection (6), the breach of condition D is not remedied by the time mentioned in that subsection, the group or company (as the case may be) is treated as having ceased to be a UK REIT at the end of the accounting period in which the breach began.
8
In this section “the first 3-year period” has the meaning given by section 527(8).
562BF3Breach of further condition relating to shares
1
Subsection (2) applies if the condition in section 528A (further condition relating to shares) is not met in relation to an accounting period.
2
The group or company (as the case may be) is to be treated as having ceased to be a UK REIT at the end of the previous accounting period.
3
But subsection (2) does not apply if the condition is not met as a result of—
a
the principal company of a group UK REIT becoming a member of another group UK REIT, or
b
a company UK REIT becoming a member of a group UK REIT,
and, accordingly, the breach is to be ignored.
4
This section is subject to section 562C.
562CF3Breach of further condition relating to shares in accounting periods 1, 2 and 3
1
Subsection (2) applies if the condition in section 528A, as relaxed by section 528B, is not met in relation to accounting period 1, accounting period 2 and accounting period 3.
2
The group or company (as the case may be) is to be treated as having ceased to be a UK REIT at the end of accounting period 2.
3
But subsection (2) does not apply if the condition, as relaxed, is not met as a result of—
a
the principal company of a group UK REIT becoming a member of another group UK REIT, or
b
a company UK REIT becoming a member of a group UK REIT,
and, accordingly, the breach is to be ignored.
4
In this section “accounting period 2” and “accounting period 3” have the same meaning as in section 528B.
563Breach of conditions as to property rental business
1
Subsection (2) applies if condition A or B in section 529 (property rental business) is not met in the case of a UK REIT throughout an accounting period of—
a
in the case of a group UK REIT, the principal company of the group, and
b
in the case of a company UK REIT, the company.
2
The breach is to be ignored.
564Breach of condition as to distribution of profits
1
Subsection (2) applies if the condition in section 530 (distribution of profits) is not met in relation to an accounting period.
2
The breach is to be ignored; but the amount given by section 565 (“the section 565 amount”) is charged to corporation tax under the charge to corporation tax on income.
3
The section 565 amount is to be treated as profits of residual business—
a
of the principal company of the group UK REIT, or
b
of the company UK REIT,
as the case may be.
F254
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F135
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F136
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F137
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F138
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9
No loss, deficit, expense or allowance may be set off against the section 565 amount.
F110
In this section and section 565, “ distribution ” is to be read in accordance with section 530(6A) and (6B).
565“The section 565 amount”
1
For the purposes of section 564 “the section 565 amount” is found by subtracting D from P.
2
In the case of a group UK REIT—
3
In the case of a company UK REIT—
P is 90% of the company's profits from property rental business arising in the accounting period, and
D is the gross amount of those profits distributed in respect of the accounting period F18within —
F144
The definition of “D” in subsections (2) and (3) needs to be read with section 530A (so far as applicable).
566Breach of condition B in section 531 in accounting period 1
1
Subsection (2) applies if condition B in section 531 (balance of business: assets involved in property rental business)—
a
is not met in relation to accounting period 1, but
b
is met at the beginning of the next accounting period.
2
The breach is to be ignored; F21...
F223
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F224
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F225
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F226
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F23567Meaning of “the notional amount”
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568Breach of balance of business conditions after accounting period 1
1
If—
a
condition A in section 531 (balance of business: profits) is not met in relation to an accounting period other than accounting period 1, but
b
the profits of property rental business of the UK REIT in question are at least 50% of its aggregate profits for the period,
the breach is to be ignored.
2
If—
a
condition B in section 531 (balance of business: assets) is not met in relation to an accounting period other than accounting period 1, but
b
the F24sum of the values mentioned in section 531(5)(a) and (b) is at least 50% of the total value of assets held by the UK REIT,
the breach is to be ignored.
3
Subsections (1) and (2) are to be read in accordance with section 531.
569Chapter subject to section 572
This Chapter is subject to section 572 (under which an officer of Revenue and Customs may terminate the UK REIT status of a group or company in certain circumstances).