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HMRC internal manual

Guidance on Real Estate Investment Trusts

Capital gains: computational rules: transfers of assets within a group where the principal company is a single company UK-REIT



A single company UK-REIT may be the principal company of a capital gains group. Section 171(1) TCGA does not apply to a disposal by or to such a company because of S171(2)(da) TCGA 1992. The disapplication does not however extend to a group of companies that has joined the regime to be a Group REIT (section 601 CTA 2010).


Section 171(2) TCGA contains a list of types of companies to which section 171(1) (transfer within a group: general provisions) do not apply. Section 171(2)(da) TCGA adds UK-REITs to this list, but has effect only where the principal company of a group has elected to join the regime as a single company (see GREIT11030). The operation of section 171 TCGA for a Group REIT is covered by section 601 CTA 2010, and an example of how it works can be found at GREIT05030.

Where a company with 75% subsidiaries forming a capital gains group joins the regime as a single company UK-REIT, the principal company is covered by the UK-REIT rules in Part 12 CTA 2010 but its subsidiaries are not. In this case, the principal company cannot dispose of assets at no gain/no loss to its subsidiaries. Neither can the subsidiaries transfer assets to the principal company at no gain/no loss, but one subsidiary can use section 171(1) TCGA to transfer an asset to another subsidiary at no gain/ no loss. Section 171(1) TCGA cannot apply to an actual disposal of an asset, used in the property rental business, to or from a principal company. In these circumstances, it follows that the principal company cannot be a party to an election to deem a disposal under section 171A TCGA in respect of its property rental business assets to arise in a 75% subsidiary. However, a 75% subsidiary could use s 171A TCGA to elect a gain into another member of the group (which was not the principal company) including a gain arising on a transfer of an asset which begins to be used by the principal company for its property rental business.