Finance Act 2012

Being a UK REIT: conditions for company - close companies U.K.

2 (1) Section 525 (becoming a UK REIT: supplementary provision) is amended as follows. U.K.

(2) In subsection (1)(c) for “the conditions” substitute “ conditions A, B, C, E and F ”.

(3) In subsection (4)(a) omit “D,”.

(4) Omit subsections (5) to (8).

3 U.K. In section 527 (being a UK REIT in relation to an accounting period) after subsection (4) insert—

“(5) Subsections (2)(a) and (3)(a) are also subject to subsections (6) to (8).

(6) If the accounting period ends during the first 3-year period, condition D in section 528 does not have to be met.

(7) If the accounting period begins, but does not end, during the first 3- year period, condition D in section 528 only has to be met throughout the part of the accounting period falling after the end of the first 3- year period.

(8) In subsections (6) and (7) “the first 3-year period” means the period of 3 years beginning with the date specified in the notice given under section 523 or 524.”

4 (1) Section 528 (conditions for company) is amended as follows. U.K.

(2) In subsection (4)(b) for the words from “a limited partnership” to the end substitute “ an institutional investor ”.

(3) After subsection (4) insert—

“(4A) Institutional investor” means any of the following persons—

(a) the trustee or manager of—

(i) an authorised unit trust scheme (as defined in section 237(3) of FISMA 2000), or

(ii) a unit trust scheme (as defined in section 237(1) of FISMA 2000) which is authorised under the law of a territory outside the United Kingdom in a way which makes it, under that law, the equivalent of an authorised unit trust scheme (as defined in section 237(3) of that Act);

(b) a company—

(i) which is an open-ended investment company (as defined in section 236(1) of FISMA 2000) incorporated by virtue of regulations under section 262 of that Act, or

(ii) which is incorporated under the law of a territory outside the United Kingdom and is, under that law, the equivalent of an open-ended investment company (as defined in section 236(1) of FISMA 2000);

(c) a person acting on behalf of a limited partnership which is a collective investment scheme (as defined in section 235 of FISMA 2000);

(d) the trustee or manager of a pension scheme (as defined in section 150(1) of FA 2004);

(e) a person acting in the course of a long-term insurance business (that is, the activity of effecting or carrying out contracts of long-term insurance within the meaning of the Financial Services and Markets (Regulated Activities) Order 2001 (S.I. 2001/544)) who—

(i) is authorised under FISMA 2000 to carry on such business, or

(ii) has an equivalent authorisation under the law of a territory outside the United Kingdom to carry on such business;

(f) a charity;

(g) a person registered under any of the following provisions (which provide for registers of social landlords)—

(i) in England, section 111 of the Housing and Regeneration Act 2008;

(ii) in Scotland, section 20 of the Housing (Scotland) Act 2010 (asp 17);

(iii) in Wales, section 1 of the Housing Act 1996;

(iv) in Northern Ireland, Article 14 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/1725 (N.I. 15));

(h) a person who cannot be liable for corporation tax or income tax (as relevant) on the ground of sovereign immunity.

(4B) The Treasury may by regulations amend the definition of “institutional investor” by inserting, omitting or amending a description of person in subsection (4A).”

5 U.K. In section 558 (demergers: disposal of asset) in subsections (3) and (6) for “C to F” substitute “ C, E and F ”.

6 U.K. In section 559 (demergers: company leaving group UK REIT) in subsections (6) and (9) for “C to F” substitute “ C, E and F ”.

7 U.K. In section 561 (notice of breach of relevant Chapter 2 condition) after subsection (4) insert—

“(5) 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).”

8 (1) Section 562 (breach of conditions C and D in section 528) is amended as follows. U.K.

(2) In the heading for “conditions C and D” substitute “ condition C ”.

(3) In subsection (1) for the words from “or D” to “conditions)” substitute “ in section 528 ”.

(4) In subsection (2)—

(a) for “both conditions C and D are” substitute “ condition C is ”, and

(b) for “breaches are” substitute “ breach is ”.

(5) Omit subsections (3) and (4).

(6) In subsection (5)—

(a) in paragraph (a) for “either condition C or D” substitute “ condition C ”, and

(b) in paragraph (b) omit “or (3)”.

9 U.K. After section 562 insert—

“562A Breach 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).”

10 (1) Section 572 (termination by notice given by HMRC) is amended as follows. U.K.

(2) In subsection (2) after “573,” insert “ 573A, ”.

(3) After subsection (5) insert—

“(5A) Subsection (4)(a) has effect subject to section 573A(8).”

11 U.K. After section 573 insert—

“573A Notice under section 572: condition D in section 528 not met

(1) An officer of Revenue and Customs may give a notice under section 572(1) if—

(a) at any time during the first 3-year period, condition D in section 528 is not met, and

(b) as at that time, subsection (2) has applied to a member of the group or the company (as the case may be) for a period exceeding 3 years or for a number of periods which in total exceed 3 years.

(2) This subsection applies to a company at any time when—

(a) the company is, or is a member of, a UK REIT,

(b) condition D in section 528 is not met in relation to the UK REIT, and

(c) the first 3-year period in relation to the UK REIT has not ended.

(3) Neither subsection (1)(a) nor subsection (2)(b) covers cases in which condition D in section 528 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.

(4) Subsection (5) applies if—

(a) a company ceases to carry on a business (“the transferred business”) which it carried on at a time (“the relevant time”) when subsection (2) applied to the company, and

(b) another company (“company X”) begins to carry on the transferred business.

In paragraph (a) the reference to a business includes a part of a business.

(5) Subsection (2) is to be taken to have applied at the relevant time to the following companies—

(a) company X, and

(b) if company X subsequently ceases to carry on the transferred business (or any part of it), any other companies which from time to time carry on the transferred business (or any part of it).

(6) In this section “the first 3-year period” has the meaning given by section 527(8).

(7) If a notice is given under section 572(1) in a case within this section, subsection (8) applies instead of section 572(4)(a).

(8) The group or company (as the case may be) is to be taken to have ceased to be a UK REIT on—

(a) the first day of accounting period 1, or

(b) such later day as may be specified by the officer of Revenue and Customs in the notice.”

12 (1) Section 577 (multiple breaches of conditions in Chapter 2) is amended as follows. U.K.

(2) In subsection (5)(a) for “section 562(2) and (3)” substitute “ section 562A(6) ”.

(3) In subsection (7)—

(a) in paragraph (b) omit “or D” and “or (5) to (7)”, and

(b) in paragraph (c) for “C to F” substitute “ C, E and F ”.

(4) After subsection (7) insert—

“(8) In accordance with section 527(6) and (7), a breach of condition D in section 528 during the first 3-year period (as defined in section 527(8)) is also to be ignored for the purposes of this section.”

13 (1) The amendments made by paragraph 2 have effect in relation to notices given under section 523 or 524 specifying a date which is on or after the day on which this Act is passed. U.K.

(2) The amendments made by paragraphs 3 to 12 have effect in relation to—

(a) groups of companies in respect of which notices are given under section 523 specifying a date which is on or after the day on which this Act is passed, and

(b) companies which give notices under section 524 specifying a date which is on or after the day on which this Act is passed.

(3) The amendments made by paragraph 4 also have effect in relation to—

(a) groups of companies in respect of which notices are given under section 523 specifying a date which is before the day on which this Act is passed, and

(b) companies which give notices under section 524 specifying a date which is before the day on which this Act is passed,

for accounting periods beginning on or after the day on which this Act is passed (including, in relation to a breach beginning in an accounting period beginning before that day, for the purpose of determining under section 562(3) whether the breach is remedied in an accounting period beginning on or after that day).