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HMRC internal manual

Investment Funds Manual

Real Estate Investment Trust : Distributions: dividend strips: taxation of seller

Tax treatment of seller of PID

In general the sum received for the sale or transfer of the income stream is subject to tax in the transferor’s hands in the same way as the income itself would have been. (CTA2010/Part16)

Exception to general rule

The exception to the general rule is where the sale proceeds are chargeable to income or corporation tax under other provisions of the Taxes Acts, for instance as the receipt of a trade.  The amount that is brought into account is deemed to be the sale proceeds. 

 

For example, bank B has 1,000 shares in UK-REIT A.  A declares a PID of 10 in July 2017.  B sells to UK company C the right to its PID for 7,750.  In the hands of the bank, the 7,750 is a Schedule D Case I receipt.  B cannot make any claim in respect of the difference between their sale proceeds and the gross amount of the PID.  C receives 8,000 from A and is chargeable to corporation tax at 17% on 10,000 and can offset the 2000 tax deducted from the PID against the amount of CT due and reclaim the balance.