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HMRC internal manual

Guidance on Real Estate Investment Trusts

Distributions: administration: reconciliations


At the end of each accounting period of the company (principal company of a GroupREIT), the company must provide a reconciliation showing how distributions made in theperiod have been attributed between the five categories in section 123 FA 2006 (see GREIT08010 onwards for attribution rules). The reconciliationshould accompany any quarterly return for the period ending on the last day of theaccounting period i.e. within 14 days of the end of the accounting period. If nodistributions were made in that final return period, the company would not normally sendin a return. In this case, it is sufficient to send the reconciliation for the accountingperiod directly to the tax office that deals with the company.

To enable the company to prepare accurately the reconciliation it is likely that thecompany will need to calculate

  • distributable reserves allocated to the relevant categories as at the end of the previous accounting period (once the first accounting period as a UK-REIT has passed, this will be the closing balances shown on the reconciliation for the previous year);
  • any adjustments to the brought forward amounts, arising for example from revisions to estimates of taxable profits / final determination of profits for the prior year;
  • amounts of any interim and final distributions paid in the accounting period just finished, allocated to the relevant categories for the current and previous accounting period.

When submitting the reconciliation, the company does not need to establish profits forthe accounting period just finished, or to prepare tax computations for that accountingperiod. It may, however, choose to include estimates of the current year profits in thereconciliation if it wishes.

The reconciliation may include negative balances where the income of the year has not beenincluded in the reconciliation but dividends have been attributed to anticipated incomefor the year.


Category (a) may be made up of contributions to meeting the 90% distributionrequirement for the accounting period in which the distribution was made and for theaccounting period(s) that ended within the previous 12 months (see Example 1(2) at GREIT08023). Where this is the case, the company may want toshow the split between the accounting periods in the reconciliation.


Two of the five categories can include amounts that relate to income and gains thatarose before the company joined the regime (categories (b) and (e) of section 123). Thereconciliation for the first accounting period that the company is within the regime willhave as its starting point (as opening balances) distributable reserves as at the date thecompany joined the regime.

Companies may take a pragmatic approach to allocating the total amount between (b)‘income from taxable activities’ and (e) ‘other’. Although allocatingmore to the taxable income pot gives a bigger cushion for paying out pre-entry profits asnormal dividends post-entry, distributions attributable to either pot are payable asnormal dividends. Once the company has allocated its existing reserves as part of thereconciliation at the end of the first accounting period as a UK-REIT, the company cannotalter the allocation. There is however, no obligation to distinguish between pre-entry andpost-entry amounts in (b) and (e) thereafter.

See GREIT08085 and GREIT08095 forexamples of the type of reconciliation required.

Note that the requirement to make quarterly returns and to provide annual reconciliationscontinues to apply to a former UK-REIT (or to the principal company of a formerGroup-REIT) until all tax-exempt profits and gains have been distributed as PID.