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HMRC internal manual

Guidance on Real Estate Investment Trusts

HM Revenue & Customs
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Distributions: attribution rules: category (a) - 90% mandatory distribution


Distributions made by the company (principal company in the case of Group REIT) areattributed between PID and normal company dividends in up to five categories (section 123FA 2006). See GREIT08025 to GREIT08040 for information aboutCategories (b) to (e).

90% requirement

Distributions made by the company to meet the mandatory 90% distribution requirementare earmarked as meeting the Category (a) requirement. This part of the distribution is aPID, paid under deduction of income tax at basic rate (other than for gross payment casesas set out in regulation 7 SI 2006/2867).

Group REITs

The amount the principal company of a Group REIT is required to pay out to meet themandatory 90% distribution is based on the measure of income that, across the variousmembers of the group, has been exempted from tax as a consequence of the group being aUK-REIT. In earmarking the distributable reserves of the principal company therefore it isnot by reference to the nature of the profits as they arise to that company (which willoften be as dividends paid up from subsidiaries that carry on tax-exempt business), but byreference to the amount of the various kinds of profit that arise to all the members ofthe group.

Interaction with company law and commercial concepts

When a company makes a distribution, it is paid out of distributable reserves as at acertain date and is usually declared in respect of the profits of a particular period ofaccount. However, when attributing a portion of the distribution to Category (a), it isnot necessary to preserve the accounting link with a particular period.

The requirement is that 90% of the tax-exempt income of an accounting period (as definedfor CT purposes) is distributed as a PID by the CTSA filing date for that period. It isequally acceptable to HMRC to earmark part of each distribution made during an accountingperiod and in the 12 months up to the filing date for that period (example 1(2) in GREIT08023), as it is to earmark part or all of only the interimor final distributions that are declared in respect of the profits of the period ofaccount (example 1(1)) in GREIT08023), or indeed anycombination.

For the interaction between Category (a) attribution and interim distributions, see GREIT08045.