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HMRC internal manual

Guidance on Real Estate Investment Trusts

HM Revenue & Customs
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Leaving the regime: effects of cessation: deemed sale and reacquisition of assets



When the exiting company leaves the regime the property rental business is treated as ceasing on the last day the regime applies to it. The assets that were involved in the exiting company’s property rental business are treated as though they had been disposed of and reacquired by the exiting company post cessation (section 579(4) CTA 2010).


An asset is ‘involved in the business’ for this purpose if it would be a property involved in the business for the purposes of the conditions as to the property rental business (section 529 CTA 2010)- see GREIT02025.

Capital Gains

The deemed disposal of assets takes place at market value, which takes the same meaning as it does for TCGA purposes (section 609 CTA 2010). This is the price that the assets might reasonably be expected to fetch on a sale in the open market with a willing buyer and seller negotiating on the basis of full information (see CG16330).

If the deemed sale and reacquisition would result in a gain for the company’s property rental business, this is not a chargeable gain for TCGA purposes because the exemption from tax on capital gains in section 535 CTA 2010 applies to gains on these disposals. If the result is a loss, that loss is not allowable for TCGA purposes.

Companies/principal companies that are in the regime have to be stock exchange-listed. This means that UK listed companies will be following RICS (Royal Institute of Chartered Surveyors) guidelines in valuing the properties on their books, and valuations will therefore be professional and recent. As a rule of thumb, values shown in the published accounts should be a reliable starting point for determining market value for this purpose. For guidance on valuing property, see CG74000.

This deemed sale and reacquisition effectively sets a new base cost for capital purposes going forward. For interactions of cessation provisions and capital gains claims and elections that can be made, see GREIT05050 onwards.

Capital allowances

For capital allowance purposes, the transfer takes place at tax written-down value such that no balancing charges or allowances arise to the exiting company’s property rental business. The effect of this is that the exiting company’s post-cessation property business takes over the capital allowance position of the property rental business before exit.

For interactions of cessation provisions and capital allowances claims and elections that can be made, see GREIT04010.

Indirectly held property

The extent to which property held via partnerships etc is treated as sold and reacquired at cessation will depend on the nature of the entity through which it is held. For more information on this, see GREIT03030.