Finance Bill

Session 2012 - 13
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 4 — Real estate investment trusts
185

it) substitute—
“(b)
the company, the staff provider and (if different) the staff
controller (or staff controllers) are not all connected,”.
Application
38
The amendments made by paragraphs 2 and 16 to 37 have effect in relation
5
to expenditure incurred on or after 1 April 2012.
39
The amendments made by paragraphs 3 to 8 and 15 have effect in relation to
accounting periods ending on or after 1 April 2012.
40
The amendments made by paragraphs 9 to 14 have effect in relation to
claims or elections made on or after 1 April 2012.
10
Schedule 4
Section 21

Real estate investment trusts
Introduction
1
Part 12 of CTA 2010 (real estate investment trusts) is amended as follows.
Being a UK REIT: conditions for company - close companies
15
2     (1)
Section 525 (becoming a UK REIT: supplementary provision) is amended as
follows.
      (2)
In subsection (1)(c) for “the conditions” substitute “conditions A, B, C, E and
F”.
      (3)
In subsection (4)(a) omit “D,”.
20
      (4)
Omit subsections (5) to (8).
3
In section 527 (being a UK REIT in relation to an accounting period) after
subsection (4) insert—
“(5)
Subsections (2)(a) and (3)(a) are also subject to subsections (6) to (8).
(6)
If the accounting period ends during the first 3-year period,
25
condition D in section 528 does not have to be met.
(7)
If the accounting period begins, but does not end, during the first 3-
year period, condition D in section 528 only has to be met throughout
the part of the accounting period falling after the end of the first 3-
year period.
30
(8)
In subsections (6) and (7) “the first 3-year period” means the period
of 3 years beginning with the date specified in the notice given under
section 523 or 524.”
4     (1)
Section 528 (conditions for company) is amended as follows.
      (2)
In subsection (4)(b) for the words from “a limited partnership” to the end
35
substitute “an institutional investor”.

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Schedule 4 — Real estate investment trusts
186

      (3)
After subsection (4) insert—
“(4A)
“Institutional investor” means any of the following persons—
(a)
the trustee or manager of—
(i)
an authorised unit trust scheme (as defined in section
237(3) of FISMA 2000), or
5
(ii)
a unit trust scheme (as defined in section 237(1) of
FISMA 2000) which is authorised under the law of a
territory outside the United Kingdom in a way which
makes it, under that law, the equivalent of an
authorised unit trust scheme (as defined in section
10
237(3) of that Act);
(b)
a company—
(i)
which is an open-ended investment company (as
defined in section 236(1) of FISMA 2000) incorporated
by virtue of regulations under section 262 of that Act,
15
or
(ii)
which is incorporated under the law of a territory
outside the United Kingdom and is, under that law,
the equivalent of an open-ended investment
company (as defined in section 236(1) of FISMA
20
2000);
(c)
a person acting on behalf of a limited partnership which is a
collective investment scheme (as defined in section 235 of
FISMA 2000);
(d)
the trustee or manager of a pension scheme (as defined in
25
section 150(1) of FA 2004);
(e)
a person acting in the course of a long-term insurance
business (that is, the activity of effecting or carrying out
contracts of long-term insurance within the meaning of the
Financial Services and Markets (Regulated Activities) Order
30
2001 (S.I. 2001/544)) who—
(i)
is authorised under FISMA 2000 to carry on such
business, or
(ii)
has an equivalent authorisation under the law of a
territory outside the United Kingdom to carry on such
35
business;
(f)
a charity;
(g)
a person registered under any of the following provisions
(which provide for registers of social landlords)—
(i)
in England, section 111 of the Housing and
40
Regeneration Act 2008;
(ii)
in Scotland, section 20 of the Housing (Scotland) Act
2010 (asp 17);
(iii)
in Wales, section 1 of the Housing Act 1996;
(iv)
in Northern Ireland, Article 14 of the Housing
45
(Northern Ireland) Order 1992 (S.I. 1992/1725 (N.I.
15));
(h)
a person who cannot be liable for corporation tax or income
tax (as relevant) on the ground of sovereign immunity.

Finance Bill
Schedule 4 — Real estate investment trusts
187

(4B)
The Treasury may by regulations amend the definition of
“institutional investor” by inserting, omitting or amending a
description of person in subsection (4A).”
5
In section 558 (demergers: disposal of asset) in subsections (3) and (6) for “C
to F” substitute “C, E and F”.
5
6
In section 559 (demergers: company leaving group UK REIT) in subsections
(6) and (9) for “C to F” substitute “C, E and F”.
7
In section 561 (notice of breach of relevant Chapter 2 condition) after
subsection (4) insert—
“(5)
The following subsections apply in relation to condition D in section
10
528.
(6)
In accordance with section 527(6) and (7), a notification does not have
to be given under subsection (1) or (2) if condition D ceases to be met
during the first 3-year period.
(7)
If condition D is not met at the start of the first day after the end of
15
the first 3-year period, for the purposes of subsections (1) to (4)
condition D is treated as having ceased to be met at the start of that
day.
(8)
In subsections (6) and (7) “the first 3-year period” has the meaning
given by section 527(8).”
20
8     (1)
Section 562 (breach of conditions C and D in section 528) is amended as
follows.
      (2)
In the heading for “conditions C and D” substitute “condition C”.
      (3)
In subsection (1) for the words from “or D” to “conditions)” substitute “in
section 528”.
25
      (4)
In subsection (2)—
(a)
for “both conditions C and D are” substitute “condition C is”, and
(b)
for “breaches are” substitute “breach is”.
      (5)
Omit subsections (3) and (4).
      (6)
In subsection (5)—
30
(a)
in paragraph (a) for “either condition C or D” substitute “condition
C”, and
(b)
in paragraph (b) omit “or (3)”.
9
After section 562 insert—
“562A
Breach of condition D in section 528 (conditions for company)
35
(1)
This section makes provision about cases relating to breaches of
condition D in section 528 in relation to—
(a)
the principal company of a group UK REIT, or
(b)
a company UK REIT.
(2)
In accordance with section 527(6) and (7), a breach of condition D
40
during the first 3-year period is to be ignored.

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Schedule 4 — Real estate investment trusts
188

(3)
If condition D is not met at the start of the first day after the end of
the first 3-year period, the group or company (as the case may be) is
to be treated as having ceased to be a UK REIT at the end of the first
3-year period.
(4)
If condition D is not met at any time after the start of the day
5
mentioned in subsection (3), the group or company (as the case may
be) is to be treated as having ceased to be a UK REIT at—
(a)
the end of the accounting period preceding the accounting
period in which the breach began, or
(b)
if later, the end of the first 3-year period.
10
(5)
Neither subsection (3) nor subsection (4) applies if condition D is not
met as a result of—
(a)
the principal company of a group UK REIT becoming a
member of another group UK REIT, or
(b)
a company UK REIT becoming a member of a group UK
15
REIT,

and, accordingly, the breach is to be ignored.
(6)
Subsection (4) does not apply if—
(a)
condition D is not met as a result of anything done (or not
done) by a person other than the company in question, and
20
(b)
the company remedies the breach not later than the end of the
accounting period after that in which the breach began,

and, accordingly, the breach is to be ignored.
(7)
But if, in a case within subsection (6), the breach of condition D is not
remedied by the time mentioned in that subsection, the group or
25
company (as the case may be) is treated as having ceased to be a UK
REIT at the end of the accounting period in which the breach began.
(8)
In this section “the first 3-year period” has the meaning given by
section 527(8).”
10    (1)
Section 572 (termination by notice given by HMRC) is amended as follows.
30
      (2)
In subsection (2) after “573,” insert “573A,”.
      (3)
After subsection (5) insert—
“(5A)
Subsection (4)(a) has effect subject to section 573A(8).”
11
After section 573 insert—
“573A
Notice under section 572: condition D in section 528 not met
35
(1)
An officer of Revenue and Customs may give a notice under section
572(1) if—
(a)
at any time during the first 3-year period, condition D in
section 528 is not met, and
(b)
as at that time, subsection (2) has applied to a member of the
40
group or the company (as the case may be) for a period
exceeding 3 years or for a number of periods which in total
exceed 3 years.
(2)
This subsection applies to a company at any time when—
(a)
the company is, or is a member of, a UK REIT,
45

Finance Bill
Schedule 4 — Real estate investment trusts
189

(b)
condition D in section 528 is not met in relation to the UK
REIT, and
(c)
the first 3-year period in relation to the UK REIT has not
ended.
(3)
Neither subsection (1)(a) nor subsection (2)(b) covers cases in which
5
condition D in section 528 is not met as a result of—
(a)
the principal company of a group UK REIT becoming a
member of another group UK REIT, or
(b)
a company UK REIT becoming a member of a group UK
REIT.
10
(4)
Subsection (5) applies if—
(a)
a company ceases to carry on a business (“the transferred
business”) which it carried on at a time (“the relevant time”)
when subsection (2) applied to the company, and
(b)
another company (“company X”) begins to carry on the
15
transferred business.

In paragraph (a) the reference to a business includes a part of a
business.
(5)
Subsection (2) is to be taken to have applied at the relevant time to
the following companies—
20
(a)
company X, and
(b)
if company X subsequently ceases to carry on the transferred
business (or any part of it), any other companies which from
time to time carry on the transferred business (or any part of
it).
25
(6)
In this section “the first 3-year period” has the meaning given by
section 527(8).
(7)
If a notice is given under section 572(1) in a case within this section,
subsection (8) applies instead of section 572(4)(a).
(8)
The group or company (as the case may be) is to be taken to have
30
ceased to be a UK REIT on—
(a)
the first day of accounting period 1, or
(b)
such later day as may be specified by the officer of Revenue
and Customs in the notice.”
12    (1)
Section 577 (multiple breaches of conditions in Chapter 2) is amended as
35
follows.
      (2)
In subsection (5)(a) for “section 562(2) and (3)” substitute “section 562A(6)”.
      (3)
In subsection (7)—
(a)
in paragraph (b) omit “or D” and “or (5) to (7)”, and
(b)
in paragraph (c) for “C to F” substitute “C, E and F”.
40
      (4)
After subsection (7) insert—
“(8)
In accordance with section 527(6) and (7), a breach of condition D in
section 528 during the first 3-year period (as defined in section
527(8)) is also to be ignored for the purposes of this section.”

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Schedule 4 — Real estate investment trusts
190

13    (1)
The amendments made by paragraph 2 have effect in relation to notices
given under section 523 or 524 specifying a date which is on or after the day
on which this Act is passed.
      (2)
The amendments made by paragraphs 3 to 12 have effect in relation to—
(a)
groups of companies in respect of which notices are given under
5
section 523 specifying a date which is on or after the day on which
this Act is passed, and
(b)
companies which give notices under section 524 specifying a date
which is on or after the day on which this Act is passed.
      (3)
The amendments made by paragraph 4 also have effect in relation to—
10
(a)
groups of companies in respect of which notices are given under
section 523 specifying a date which is before the day on which this
Act is passed, and
(b)
companies which give notices under section 524 specifying a date
which is before the day on which this Act is passed,
15

for accounting periods beginning on or after the day on which this Act is
passed (including, in relation to a breach beginning in an accounting period
beginning before that day, for the purpose of determining under section
562(3) whether the breach is remedied in an accounting period beginning on
or after that day).
20
Being a UK REIT: conditions for company - trading of shares on recognised stock exchange
14
In section 527 (being a UK REIT in relation to an accounting period) in
subsections (2) and (3) after paragraph (a) insert—
“(aa)
the condition in section 528A (further condition relating to
shares) must be met in relation to the period,”.
25
15
In section 528 (conditions for company) in subsection (3) for “listed”
substitute “admitted to trading”.
16
After section 528 insert—
“528A
Further condition relating to shares
(1)
In the case of a group UK REIT, the condition in this section is met in
30
relation to an accounting period if—
(a)
throughout the accounting period, the shares forming the
principal company’s ordinary share capital meet the
requirement of section 1137(2)(b) (definition of “listed” in
relation to shares), or
35
(b)
during the accounting period, shares forming part of the
principal company’s ordinary share capital are traded on a
recognised stock exchange.
(2)
In the case of a company UK REIT, the condition in this section is met
in relation to an accounting period if—
40
(a)
throughout the accounting period, the shares forming the
company’s ordinary share capital meet the requirement of
section 1137(2)(b) (definition of “listed” in relation to shares),
or
(b)
during the accounting period, shares forming part of the
45
company’s ordinary share capital are traded on a recognised
stock exchange.

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Schedule 4 — Real estate investment trusts
191

(3)
This section is subject to section 528B.
528B
Relaxation of section 528A condition for accounting periods 1 to 3
(1)
This section relaxes the requirements of section 528A in relation to
accounting period 1, accounting period 2 and accounting period 3.
(2)
In the case of a group UK REIT, the condition in section 528A is met
5
in relation to accounting period 1, accounting period 2 and
accounting period 3 if—
(a)
at the end of the relevant period, the shares forming the
principal company’s ordinary share capital meet the
requirement of section 1137(2)(b) (definition of “listed” in
10
relation to shares), or
(b)
during the relevant period, shares forming part of the
principal company’s ordinary share capital are traded on a
recognised stock exchange.
(3)
In the case of a company UK REIT, the condition in section 528A is
15
met in relation to accounting period 1, accounting period 2 and
accounting period 3 if—
(a)
at the end of the relevant period, the shares forming the
company’s ordinary share capital meet the requirement of
section 1137(2)(b) (definition of “listed” in relation to shares),
20
or
(b)
during the relevant period, shares forming part of the
company’s ordinary share capital are traded on a recognised
stock exchange.
(4)
In this section—
25
“accounting period 2” means the accounting period following
accounting period 1,
“accounting period 3” means the accounting period following
accounting period 2, and
“the relevant period” means the period consisting of accounting
30
period 1, accounting period 2 and accounting period 3.”
17
In section 561 (notice of breach of relevant Chapter 2 condition) in subsection
(3) before “conditions A and B in section 529” insert—

“the condition in section 528A (further condition relating to
shares),”.
35
18
Before section 563 insert—
“562B
Breach of further condition relating to shares
(1)
Subsection (2) applies if the condition in section 528A (further
condition relating to shares) is not met in relation to an accounting
period.
40
(2)
The group or company (as the case may be) is to be treated as having
ceased to be a UK REIT at the end of the previous accounting period.
(3)
But subsection (2) does not apply if the condition is not met as a
result of—
(a)
the principal company of a group UK REIT becoming a
45
member of another group UK REIT, or