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HMRC internal manual

Guidance on Real Estate Investment Trusts

HM Revenue & Customs
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Conditions and Tests: Tax-exempt business Conditions: Condition 1

Three or more properties

Tax-exempt business Condition 1 is that the property rental business involves at least three separate rental properties. The definitions of ‘property’, ‘involves’ and ‘single property’ are in section 107(6) FA 2006. The three property requirement must be met throughout each accounting period. Failure to meet it does not result in automatic expulsion from the regime; provided the breach is minor, does not last for too long, nor has happened too often (see GREIT07030 for details of the parameters).


‘Property’ is ‘involved’ in the business if it is an estate or interest in land that is exploited in earning income for that property rental business. This reflects the definition of property business in section 204-6 of CTA 2009.

Since the business concerned is the property rental business as defined in section 104 FA 2006, the exclusions listed in Schedule 16 will also apply to this test. This means for instance that part of a field rented out for a mobile phone mast would not count as a property involved in a business for this condition.

‘Single property’ is any unit that is designed, fitted or equipped for separate rental. This means that, for example, each shop within a shopping complex would count as one property.

For more detail on how the definition of property applies, see GREIT02030.

Indirectly held property

For the extent to which this can count for satisfying the property tests of the tax-exempt business conditions see GREIT02033.

Group REITs

For a Group REIT, the property rental businesses of all the members of the group are treated as being a single business (paragraph 6(1) Schedule 17 FA 2006). Tax-exempt business Condition 1 must be met by that single business (see GREIT12000 onwards for more detail). The same rules about breaching the conditions as described above apply also for the single property rental business carried on by a Group REIT.