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HMRC internal manual

Investment Funds Manual

Real Estate Investment Trust : Distributions: The distribution requirement : CTA2010/S530

A condition of remaining in the regime is that the company (principal company for a Group REIT) must pay out 100% of “UK REIT investment profits” plus 90% of the income profits of the property rental business of each accounting period by the CTSA filing date for that period (CTA2010/S530).  That mandatory distribution is treated as a PID. 

“UK REIT investment profits” are distributions of property rental business profits and gains paid by one UK REIT to another (CTA2010/S549A). The requirement to distribute 100% of PIDs received prevents dilution of the distribution paid and taxed on the investors.

If the company wants to distribute more to its shareholders, there are attribution rules to determine how much of any additional distribution is from profits of the property rental business (and therefore payable as a PID under deduction of basic rate tax) or is out of profits that arose from taxable activities (and therefore treated as normal distributions with no requirement to deduct tax on payment).  The attribution rules are set out in IFM28010 onwards.