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HMRC internal manual

Savings and Investment Manual

Dividends and other company distributions: UK Real Estate Investment Trusts: other distributions

Not all distributions are Property Income Distributions

CTA10/S550 sets out the rules for identifying which of a UK-REIT’s distributions are from its tax-exempt property rental business, and thus payable under deduction of income tax (other than for gross payment cases - see GREIT08025).

Any other payments made by the company (principal company in the case 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 property income distributions. The same treatment applies to all payments made by subsidiary companies of a UK-REIT. These distributions are treated as normal company distributions.

A condition of being a UK-REIT is that 90% of the rental profits of its tax-exempt business as calculated for tax purposes must be paid out as distributions. Distributions made to meet this requirement are earmarked as the first part of the distribution. This distribution is paid under deduction of income tax at basic rate (other than for gross payment cases - see GREIT08025 SAIM20000).

If the distribution for the accounting period is more than the 90% minimum, the UK-REIT has a choice over the remainder. Some or all of it may be attributed to profits arising from non tax-exempt activities and paid out as a normal company distribution, to which a tax credit may attach. Income tax is not deducted on payment.

The balance (if any) arises from tax-exempt business and is paid under deduction of income tax at basic rate (other than for gross payment cases - see GREIT08025) and treated as income from a UK property business. For more information on the rules for attributing a distribution between PID and ordinary dividend, see GREIT08010. Note that the shareholder will receive a dividend voucher setting out how much of the distribution is a PID and how much (if any) is an ordinary company dividend.