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HMRC internal manual

Guidance on Real Estate Investment Trusts

HM Revenue & Customs
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Property rental business income: Property rental business/Trading borderline: general



In recent years, the borderline between a property business and a trade has become less distinct, as the rules for computing profits have moved closer together. Where the profits from both sources are taxable, generally, it makes little difference in terms of tax payable whether income or expenses are treated as relating to a property business or a trade.


However, for a company that is UK-REIT, it makes a significant difference whether income and expenses are property rental business income and expenses or trading income and expenses. Where pragmatic approaches to correct allocation have been taken in the past, a company thinking of becoming a UK-REIT may wish to review this and put matters on a correct basis for the future.

Provided that the correct basis is applied consistently going forwards and the company can show that no loss of tax arises as a result of that transition, in general, there will be no objection. Where material amounts are at stake in terms of meeting the Balance of Business (GREIT02065) and Property Rental Business Conditions (GREIT02020), companies and groups thinking of joining the regime should discuss and agree the position in advance.

Where the company lets property and provides additional services to the tenants it is a question of fact whether:

  • the whole activity (the letting of property and the services) amount to a trade, or
  • the whole activity is part of their property business, or
  • the provision of services amounts to a trade that is separate from their property rental business.

Further guidance can be found at PIM4300.

During the consultation period leading up to the UK-REIT legislation and its passage through Parliament, several areas of concern around this borderline were raised. Some of these are discussed at GREIT04035.