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HMRC internal manual

Guidance on Real Estate Investment Trusts

Leaving the regime: early exit: company notice within ten years of joining

Where a company or principal company of a group REIT leaves the regime voluntarily by giving notice under section 571 CTA 2010 and was in the regime for less than ten years, a special rule applies to the disposal of property rental business assets’ that take place within the ‘post-cessation period’ (section 581 CTA 2010).

The rule is that tax payable on the disposal will be determined without taking account of any deemed disposals on entry to or exit from the regime, or on movements out of the property rental business.

The asset will therefore not benefit from rebasing to market value at entry to the regime, and the computation of any profits or gain on disposal will use the original cost of the asset to the company. Neither is there to be a refund of any part of the Entry Charge attributable to that property.

For this purpose, a ‘property rental business asset’ is one that was exploited to produce rental income for the property rental business. The ‘post cessation period’ is the two years following the date of exit from the regime.

Group REITs

For Group REITs, the consequences of leaving early apply when the principal company of the group gives notice for the group as a whole to leave the regime within ten years of joining or a company is a member of a Group REIT for less than ten years.