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HMRC internal manual

Guidance on Real Estate Investment Trusts

Distributions: attribution rules: category (c) - other income of the tax-exempt business

If there is a balance remaining after attributing the distribution to Categories (a) and (b) (see GREIT08025), the next part of the distribution is out of income of the property rental business (i.e. of C (tax-exempt)). This includes the 10% of income of the relevant accounting period that is not covered by Category (a) as well as any parts of the 10% from previous years that have not already been allocated as distributions from Category (c). For information about the other Categories, see GREIT08010.

For a Group REIT, the amount attributable to Category (c) is based on the measure of income that, across the various members of the group, has been exempted from tax as a consequence of the group being a UK-REIT. In attributing the distributable reserves of the principal company therefore it is not by reference to the nature of the profits as they arise to that company (which will often be as dividends paid up from subsidiaries that carry on tax- exempt business), but by reference to the amount of the various kinds of profit that arise to all the members of the group.