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HMRC internal manual

Guidance on Real Estate Investment Trusts

Conditions and Tests: Balance of business Conditions

The Balance of business Conditions relates to the ratio of property rental business to other business carried on by the company, as set out in section 108 FA 2006. For each accounting period, 75% of the company’s activities by reference to income (Balance of business Condition 1 - see GREIT02070 and to asset values (Balance of business Condition 2 - see GREIT02070 - must relate to tax-exempt business.

‘Tax-exempt business’ is the property rental business (GREIT01020) of the company that meets the three Tax-exempt business Conditions in section 107 FA 2006 (GREIT02020).

Failure to meet either of these Balance of business conditions can result in the company leaving the regime. If the breach is minor, the company may be able to remain in the regime - see GREIT07005.

Group REITs

For a Group REIT, the conditions are applied at the group level, and the amounts to be used are based on figures shown in the financial statements of G (property rental business) and G (residual) (see GREIT12115).