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HMRC internal manual

Guidance on Real Estate Investment Trusts

Conditions and Tests: maximum shareholding: when and how an excessive shareholding charge arises


An excessive shareholding tax charge is imposed only if the UK-REIT company (principalcompany in the case of a Group REIT) pays a dividend in respect of an excessiveshareholding and the dividend is paid to a person, or in respect of, the holder ofexcessive rights in the company (HoER), as defined in SI 2006/2864 (see GREIT02105).

The charge is not triggered merely because a shareholder has a stake in the company of 10%or more. Neither is the tax charge triggered if the person beneficially entitled to thedividend is not also a HoER, or if the company has taken reasonable steps to prevent thedividend being paid to a HoER.

Examples to illustrate when a charge might arise are set out in GREIT02113.

How the excessive shareholding tax charge is collected

The tax charge is collected by way of deeming the company to have received a notionalamount of income in the period in which any distribution is paid to a HoER. The amount ofincome brought into charge is defined in regulation 10(2) SI 2006/2864) and is designed torecover as much tax from the UK-REIT as the HoER could potentially claim under a DTA. Thisis dealt with in more detail in GREIT02120.

‘Reasonable steps’ get out

If the company has taken reasonable steps to prevent paying an excessive dividend to,or in respect of, an excessive shareholding, then the excessive shareholding tax chargewill not be imposed. See GREIT02125 to GREIT02150 for whatHMRC may accept as reasonable steps.