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HMRC internal manual

Guidance on Real Estate Investment Trusts

From
HM Revenue & Customs
Updated
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Background: key concepts: property rental business: excluded income

Schedule 16 excludes certain types of activity from the definition of property rental business. Part 1 excludes types of business; Part 2 excludes types of income. The classes of excluded income are below. See GREIT01025 for classes of excluded business.

Caravan sites

Where an operator of a caravan site provides sufficient other service as part of running the caravan site (such as a swimming pool or a shop) the activities can amount to a trade. In this case, rent from the pitches (and any other income from the caravan site) is excluded from the definition of property rental business.

Way leaves etc

Rent arising from allowing electric lines, oil and gas pipelines can be chargeable to tax as income from property. Schedule 16 excludes this kind of income from the definition of property rental business.

Mobile phone etc masts

Rent arising from allowing mobile phone masts, satellite dishes and similar to be sited on property can be chargeable to tax as income from property . Schedule 16 excludes this kind of income from the definition of property rental business. The same applies to rent from allowing a wind turbine to be sited on property.

Dividends from another UK-REIT

Although dividends that are distributions of tax-exempt income of a UK-REIT are deemed to be profits of a property business, the deemed profits are not within the definition of property rental business. The shares do not count as qualifying assets of the property rental business and the dividends are therefore chargeable at the main CT rate as non-ring fence income. However, see part A of CTA 2009

Interest in limited liability partnership (LLP)

For tax purposes, an LLP is generally treated in the same way as an ordinary partnership, even though legally it is a body corporate. That means the UK property and overseas property business of the partnership is treated as property income etc of the partners. If an LLP is being wound up, the LLP reverts to being treated as a company for tax purposes, unless the circumstances in section 1273(3)(a) or (b) CTA 2009 apply. If they do, the LLP continues to be treated as transparent for tax purposes.

However, the exclusion provided by Schedule 16 means that if section 1273(4) CTA 2009 applies, (broadly the appointment of a liquidator or the making up of a winding up order) then, regardless of the circumstances surrounding the liquidation, the partnership profits from property business no longer qualify as profits of a property rental business for a partner that is a UK-REIT.