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HMRC internal manual

Guidance on Real Estate Investment Trusts

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HM Revenue & Customs
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Miscellaneous: transfers within a group (section 171 TCGA)

Section 135 FA 2006 adds a company that is a Real Estate Investment Trust to the list of companies in section 171(2) TCGA to which section 171(1) (transfer within a group: general provisions) do not apply. Note that where the parent company of a group elects to join the regime as a group (to which Part 4 FA 2006), it is the group as a whole that is a Real Estate Investment Trust – neither the principal company nor the subsidiary companies are individually a Real Estate Investment Trust. This means that section 135 FA 2006 applies only where the parent of a group has joined the regime as a single company.

Single company UK-REIT with subsidiaries

Transfers of assets within a group under the provisions of section 171 TCGA cannot be made where the transfer is between a company that has joined the regime as a single company UK- REIT (even though it is the parent of a group of companies) and another member of its group. This is because section 135 FA 2006 adds a company that is a Real Estate Investment Trust to the list of companies in section 171(2) TCGA to which section 171(1) (transfer within a group: general provisions) do not apply.

Where a company with 75% subsidiaries joins the regime as a single company UK-REIT, the principal company is covered by the UK-REIT rules in Part 4 FA 2006 but its subsidiaries are not. In this case, the parent company cannot transfer assets at no gain/ no loss to its subsidiaries. Neither can the subsidiaries transfer assets to the parent company at no gain/ no loss, but one subsidiary can use section 171(1) to transfer an asset to another subsidiary at no gain/ no loss.

Group REITs

The operation of section 171 TCGA for a Group REIT is covered by section 136 FA 2006, and an example of how it works can be found GREIT05050.

Section 135 FA 2006 (which deals with the application of section 171 TCGA in the context of a Real Estate Investment Trust) does not apply where the parent company of a group has given notice to join the regime as the principal company of a GroupREIT.