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 F6the 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.
F73A
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, F5...
e
alternative finance return (as defined in sections 511 to 513 of CTA 2009),
F4f
periodic payments or receipts so far as they—
i
are from any derivative contract or other arrangement entered into as a hedge of risk in connection with borrowing, and
ii
are attributable to the hedge, and
g
amortisation of discounts and premiums relating to a derivative contract or other arrangement within paragraph (f).
F25A
In subsection (5) “finance lease” means—
a
in relation to any person, a lease that, in accordance with generally accepted accounting practice, falls (or would fall) to be treated in the accounts of that person as a finance lease or loan, or
b
in relation to a lessee under a right-of-use lease, a lease that would fall to be treated in the accounts of the lessee as a finance lease if the lessee were required under generally accepted accounting practice to determine whether the lease falls to be so treated.
5B
In subsection (5A)(b) “right-of-use lease” has the meaning given in Part 2 of CAA 2001 (see section 70YI(1) of that Act).
F16
The Treasury may by regulations amend the list of matters in subsection (5) by inserting, omitting or amending a description of a matter.