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HMRC internal manual

Guidance on Real Estate Investment Trusts

Conditions and Tests: Tax-exempt business Conditions: Condition 2

No one property can be more than 40% of the total value

This condition prevents the value of any one property involved in the property rentalbusiness from being more than 40% of the value of all the property assets in that business(section 107(4) FA 2006).

This condition applies throughout each accounting period, but failure to meet it does notalways result in immediate removal from the regime. If the breach is minor and thecondition is not breached repeatedly, the company may remain in the regime - see GREIT07030.

For the definition of ‘property involved in a business’ and ‘single property’, see GREIT02025.

Valuation is using international accounting standards, and ignores any liability or chargeover the property. More detail on valuation of assets for this condition is described at GREIT02040.

Indirectly held property

For the extent to which indirectly held property can count towards the property testsof the Tax-exempt business condition see GREIT02033.

Group REITs

For a Group REIT, the property rental businesses of all the members of the group aretreated as being a single business (paragraph 6(1) Schedule 17 FA 2006). Tax-exemptbusiness Condition 2 must be met by that single business (see GREIT12000onwards for more detail). The same rules about breaching the conditions as describedabove apply also for the single property rental business carried on by a Group REIT.