Part 12Real Estate Investment Trusts

Chapter 5Assets etc

Profits: financing-cost ratio

544Meaning of “property profits” and “property financing costs”

(1)

For the purposes of section 543 “property profits” for an accounting period means—

(a)

in the case of a group UK REIT, the sum of the profits of property rental business of members of the group that arise in the period, as shown in the financial statement under section 532(2)(b), and

(b)

in the case of a company UK REIT, the amount of the profits of the company's property rental business (calculated in accordance with section 599) that arise in the period.

(2)

References in subsection (1) to a company's profits are to its profits before the offset of—

(a)

capital allowances,

(b)

losses from a previous accounting period, and

(c)

amounts taken into account as a result of section 599(3).

(3)

For the purposes of section 543 “property financing costs” for an accounting period means—

(a)

in the case of a group UK REIT, the amount of the financing costs incurred in respect of F1the group's property rental business in the United Kingdom, excluding financing costs owed by one member of the group to another, as shown in the financial statement under section 532(2)(a), and

(b)

in the case of a company UK REIT, the amount of the financing costs incurred in the period in respect of the company's property rental business.

F2(3A)

The reference in subsection (3)(a) to the group's property rental business in the United Kingdom is a reference to—

(a)

property rental business of UK members of the group, and

(b)

UK property rental business of other members.

(4)

In subsection (3) “financing costs” means the cost of debt finance.

(5)

In calculating the costs of debt finance in relation to an accounting period the matters to be taken into account F3are—

(a)

interest payable on borrowing,

(b)

amortisation of discounts relating to borrowing,

(c)

amortisation of premiums relating to borrowing,

(d)

the financing expense implicit in payments made under finance leases, and

(e)

alternative finance return (as defined in sections 511 to 513 of CTA 2009).

F4(6)

The Treasury may by regulations amend the list of matters in subsection (5) by inserting, omitting or amending a description of a matter.