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HMRC internal manual

Guidance on Real Estate Investment Trusts

Groups: leaving the regime: effects of cessation: on availability of tax relief for losses

Losses etc relating to the tax-exempt property businesses cannot be carried forward foruse in working out profits of any post-REIT property business. This is because thetax-exempt property rental business of the group members is treated as ceasing once thegroup leaves the regime.

Neither can losses arising in the first accounting period of post-cessation business becarried back to reduce profits of accounting periods before the group left the regime.This is because post-REIT property business is a different business, carried on by adifferent person (since the tax-exempt part of each group member is deemed to be a companyseparate from the company post-cessation.

To the extent that a group member, while the group was a UK-REIT, carried on activitiesother than property rental, these are regarded as a business that carries onuninterrupted, before, during and after the group is in the regime. If the group memberhad a trading loss in the final accounting period before the group leaves the regime, thatloss can be carried forward in the normal way and used against profits of the trade ascarried on by it after the group has left the regime.

If a group member has unused capital losses, including losses on disposal of non-ringfence assets while the group was in the regime and losses that arose on pre-entrydisposals of rental property, they can be carried forward and used to reduce chargeablegains that may arise to the group member post-cessation. This is because the group memberpre-entry, the residual part while the group was a UK-REIT and post-cessation are notdeemed to be separate companies or members of separate groups.