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HMRC internal manual

Guidance on Real Estate Investment Trusts

HM Revenue & Customs
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Group conditions and rules: Balance of business Conditions

As with the property rental business conditions, the Balance of business Conditions also look at the world-wide activities of the group. The tests are that at least 75% of the group’s activities by income and asset value arise from property rental business. ‘Property rental business’ is defined in section 104 FA 2006 for groups - see GREIT12000.

The conditions for groups are set out in section 108, as modified by paragraph 7 Schedule 17 FA 2006 and are adaptations of the two Balance of business Conditions for single company UK-REITs (see GREIT02065). The income condition must be met in respect of each accounting period of the principal company of the group. The asset condition must be met at the beginning of each accounting period of the principal company of the group. In some circumstances, the group may breach either of these conditions and remain in the regime - regulation 7 SI 2006/2864 and GREIT07030.

For both tests, the numbers used are based on figures derived from the two of the Financial Statements that the principal company is obliged to prepare for each of its accounting periods. These are the statements for G (property rental business) and G (residual). The information that has to be shown in these statements is set out in GREIT12115 onwards.

For REITs with joint ventures the joint venture company or group of companies has to meet the balance of business tests. The balance of business income and assets tests are applied to a REITs joint venture company by Condition 7 in regulations 3 and 7 of SI2006/2866 for sigle company joint ventures and by Regulations 8 and 20 of SI2007/3425 for joint venture groups.