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HMRC internal manual

Guidance on Real Estate Investment Trusts

Group REITs: companies covered by notice to join

All or nothing nature of Group REIT election

If the principal company of a group gives notice under section 109 FA 2006, as modified by paragraph 8 Schedule 17, then all the companies that are 75%/ effective 51% subsidiaries of the principal company are covered by Part 4 FA 2006. It is not possible to give notice that some but not all of those subsidiaries are covered.

A company with 75%/ effective 51% subsidiaries may however give notice under section 109 to become a UK-REIT as a single company - see below.

Single company election for a group of companies

It is possible for a company with 75% subsidiaries to give notice under section 109 FA 2006 to be a company to which Part 4 of FA 2006 applies. This means that the property rental business of the company itself is taken into account in deciding if the conditions for entering and remaining in the regime are met, but the same type of activities undertaken by subsidiaries are not taken into account.

Regardless of the nature of the activities undertaken by any 75%/ effective 51% subsidiaries, it is the value of the shares in those companies and the dividends they pay that are taken into account as non-qualifying income and assets. Even if the subsidiaries carry on property rental business, the income and gains arising are not exempt from tax. The rental income is not included in the 90% distribution requirement and no Entry Charge is levied in respect of any rental properties owned by these subsidiaries.