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HMRC internal manual

Investment Funds Manual

Real Estate Investment Trust : Distributions: attribution rules: CTA2010/S550

The rules for identifying which distributions made by the company (principal company in the case of a Group REIT) are from profits of the property rental business (and thus payable under deduction of income tax) are in CTA2010/S550.  It does this by requiring the company to attribute each distribution across six categories by reference to the activities that gave rise to the amounts in the company’s distributable reserves. 

The six categories are:

(a)  First to payments out of “UK REIT investment profits” (i.e. Property income distributions received by the REIT).

(aa) Second, to 90% of the rest of the profits from the property rental business in the UK.

(b)   Third, so far as the company chooses, to amounts derived from activities of a kind in respect of which CT is chargeable in relation to income,,

(c)    Fourth, to profits of property rental business in the UK (calculated in accordance with section 599),

(d)    Fifth to distribution of relevant non-chargeable gains, and

(e)    Sixth to other distributions

The amounts that are attributed to profits (income and gains) of the property rental business (i.e. categories (a), (aa), (c) and (d)) are referred to in guidance (but not in legislation) as property income distributions or PIDs. These are in general treated as income from UK property in the hands of the recipient.  

Any other payments made by the company, and all distributions made by subsidiaries of a Group REIT that are treated as distributions for tax purposes are not subject to the deduction of basic rate income tax rules that apply to PIDs (referred to in guidance as ‘non-PID dividends’). 

Amounts attributed to Categories (a), (aa), (c) and (d) will always be PID and payable under deduction of basic rate tax (apart from where SI 2006/2867/ regulation 7  applies to allow gross payment (see IFM28125).  Amounts attributed to Categories (b) and (e) will always be payable as normal company distributions.  For more detail on each of the categories and examples, see IFM28015 onwards. 

Before considering how any individual distribution is to be attributed, as a prior step, the company needs to establish the distributable reserves as shown in the most recent set of accounts.  For a Group REIT, the principal company must first of all establish the group consolidated distributable reserves (which are likely to be different from the sum of the distributable reserves of each member of the group) and split that between those that relate to activities giving rise to income and those from other activities.  This might include for example gains on disposals of assets. 

In addition, the company will need to estimate the profits of the property rental business, so as to ensure that the distribution requirement can be met in respect of the accounting period from distributions paid before the filing date of the CTSA return for that period.

Dividend vouchers

In the dividend vouchers provided to shareholders, there is no need to spell out the attribution of the PID part of the payment to categories (a), (aa), (c) and (d), nor from which accounting period the distributable reserves originate.  The vouchers need show only the aggregate amount that is derived from profits of the property rental business.  Similarly, non-PID dividends that relate to Category (b) or (e) can be shown as a single amount, without showing the attribution to category or accounting period. 


In the reconciliation that accompanies the final CT61(Z) for the return period ending on the last day of the accounting period, the company does need to show how the PID and non-PID dividends paid in the accounting period have been attributed by the company to the six categories.  Although not required by the legislation, the company may find it helpful to identify within Categories (a) and (aa) the accounting periods to which the mandatory PID relates. 

If the company did not pay any PID in the final return period, it is sufficient to send in the reconciliation – there is no need to send in a nil CT61(Z).

HMRC have developed a  PID Tracker template which forms part of the REIT financial statements tool [see IMF22300]