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HMRC internal manual

Guidance on Real Estate Investment Trusts

From
HM Revenue & Customs
Updated
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Entry to the regime: entry charge: indirect ownership of property

As well as owning property directly, the company or group members may have interests in vehicles that own property, such as companies, unit trusts, partnerships and joint ventures. This page sets out when property held via such entities is taken into account for the purposes of the Entry Charge. For more information on other aspects of indirectly held property, see GREIT09015 onwards.

Companies

A company that has elected to join the regime as a single company may have a 75%/ effective 51% subsidiary. For the Entry Charge, no account is taken of property owned by that subsidiary, unless there is a Joint Venture Look-Through notice in place between the company that is a UK-REIT and the subsidiary (see below and at GREIT13000 onwards).

If the company has given notice to join the regime as the principal company of a group, then the property owned by the subsidiary company is taken into account for the Entry Charge, to the extent group members have an interest in the subsidiary. The charge arises to the subsidiary company.

Partnerships

When a company joins the regime, there will be a deemed sale and reacquisition of its share of the property held by the partnership. An Entry Charge will arise on the company by reference to the aggregate market value of its share. Joint ventures

Unless there is Joint Venture Look-Through election (see above and at GREIT13000 onwards) in place between the company or group and the joint venture company, the legal nature of the vehicle through which the venture is carried out will determine the outcome. Where a Look-Through notice is in place, the property owned by the joint venture company is taken into account for the Entry Charge, to the extent the company that is the UK-REIT or members of the Group REIT have an interest in it. The charge arises to the joint venture company.

For example, a group REIT has a 40% stake in a joint venture company carrying on a property rental business and a look through notice has been served. That joint venture company would pay an entry charge based on 40% of the market value of the joint venture company’s properties entering the property rental business.

Authorised investment funds (AIFs)

For the Entry Charge, no account is taken of property held via an AIF, regardless of whether the AIF is constituted as an OEIC or a unit trust.

Non-resident unit trusts

There is no single answer that applies to all non-resident unit trusts. The answer will depend on whether they are regarded as transparent for income purposes (when the treatment is the same as for partnerships) or as opaque (when the treatment is the same as for companies which are not members of the group) see GREIT09020.