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HMRC internal manual

Guidance on Real Estate Investment Trusts

Group REITs: non-resident group members: dividends

Distributions paid up to 30 June 2009

Where a non-UK resident subsidiary pays dividends to a UK holding company, the dividends are normally chargeable to corporation tax under Schedule D Case V. To the extent that the dividends represent profits of the tax-exempt business of a non-UK resident subsidiary, the dividends are exempt from corporation tax (paragraph 32(7) Schedule 17 FA 2006).

The exemption applies where the dividend is paid by the non-resident subsidiary that owns the UK property to an immediate UK-resident holding company, and also where the profits from that property have been passed up through intermediate non-resident holding companies.

If the dividend includes profits from other activities, the amount that is tax-exempt is reduced accordingly. The legislation does not provide any rules for how dividends should be apportioned in these cases, but will in all cases be limited by the amount of the profits that have been exempted from UK tax.

Distributions paid from 1 July 2009

From this date dividends from foreign companies are dealt with in accordance with Part 9A CTA 2009. Generally such dividends will not be chargeable to tax.