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HMRC internal manual

Guidance on Real Estate Investment Trusts

Group REITs: non-resident group members: property rental business

The regime conditions in sections 107 and 108 FA 2006, as modified for groups by Schedule 17 look at the world-wide property rental business of the group members. These tests look at whether 75% of the group’s business is property rental and whether that business has at least three properties, with no one property representing more than 40% by value of the property rental business.

For the purposes of these conditions, the world-wide property rental businesses of the group members are treated as a single business. Any activity or business excluded by Schedule 16 FA 2006 is also excluded from property rental business for this purpose.

Because the concepts in the definition of property rental business in section 104 operate only in the context of UK resident companies, the definition is extended for non-resident subsidiaries. The extension brings within the definition of property rental business, business that would fall within the definition, were the subsidiary UK resident (see paragraph 32(2) Schedule 17).

Note that for groups, the property rental business is not the same set of activities as its tax-exempt business. The former includes all the world-wide property rental activities of the group (subject to any Schedule 16 exclusions). The latter is restricted to the world-wide property rental activities of UK resident group members and to the UK property rental activities of non-resident members of the group, again subject to Schedule 16 exclusions.