IFM22035 - Real Estate Investment Trust : Conditions And Tests: Property Rental Business Conditions: Condition B: CTA2010/S529(2)
To join and remain in the regime, a UK-REIT is required to meet two property rental business conditions (CTA2010/S529(1)). Both conditions A and B must be met throughout the accounting period of the company or group.
No one property can be more than 40% of the total value
Condition B prevents the value of any one property involved in the property rental business from being more than 40% of the value of all the property assets in that business (section 529(2) CTA 2010).
This condition applies throughout each accounting period, but failure to meet it does not always result in immediate removal from the regime. If the breach is minor and the condition is not breached repeatedly, the company may remain in the regime - see IFM27030.
For the definition of ‘property involved in a business’ and ‘single property’, see IFM22025.
Valuation is using international accounting standards, and ignores any liability or charge over the property. More detail on valuation of assets for this condition is described at IFM22040.
Indirectly held property
For the extent to which indirectly held property can count towards the property tests of the Tax-exempt business condition see IFM22033.
Group REITs
For a Group REIT, the property rental businesses of all the members of the group are treated as being a single business (CTA2010/S529(3)). Tax-exempt business Condition B must be met by that single business. The same rules about breaching the conditions as described above apply also for the single property rental business carried on by a Group REIT.