Corporation Tax Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 12 — Real Estate Investment Trusts
Chapter 9 — Leaving the UK REIT regime
295

(a)
a group or company ceases to be a UK REIT, or
(b)
a company ceases to be a member of a group UK REIT.
(2)
For the purposes of those subsections references to an “exiting company” are
to each member of the group UK REIT or (as the case may be) to the company
UK REIT.
5
(3)
Property rental business of an exiting company is to be treated for corporation
tax purposes as ceasing immediately before cessation.
(4)
Assets which immediately before cessation are involved in property rental
business of an exiting company are to be treated for corporation tax purposes
as being—
10
(a)
sold immediately before cessation by the company so far as it carries on
property rental business, and
(b)
reacquired immediately after cessation by the post-cessation company.
(5)
The sale and reacquisition deemed under subsection (4) is to be treated as being
for a consideration equal to the market value of the assets.
15
(6)
If a percentage of the assets of an exiting company is excluded from a financial
statement in accordance with section 533(3), that percentage of those assets is
to be ignored for the purposes of subsection (4).
(7)
For corporation tax purposes—
(a)
an accounting period of the company so far as it carries on residual
20
business ends on cessation, and
(b)
a new accounting period of the company begins.
(8)
In relation to a non-UK member of a group UK REIT, subsections (3) to (7) have
effect as if references to property rental business were references to UK
property rental business.
25
(9)
Subsections (3) to (7) do not apply if—
(a)
a member of a group UK REIT becomes a member of another group UK
REIT, or
(b)
a company UK REIT becomes a member of a group UK REIT.
(10)
This section is subject to section 559 (demergers: company leaving group UK
30
REIT).
580
Effects of cessation: CAA 2001
(1)
Subsections (3) to (5) apply for the purposes of CAA 2001 if a group or a
company ceases to be a UK REIT.
(2)
Subsections (3) to (5) also apply for those purposes if a company ceases to be a
35
member of a group UK REIT.
(3)
The sale and reacquisition deemed under section 579(4)—
(a)
does not give rise to allowances or charges, and
(b)
does not enable an election to be made under section 198 or 199 of CAA
2001 (apportionment).
40
(4)
Section 579(5) (deemed consideration for sale and reacquisition) does not
apply.

Corporation Tax Bill
Part 12 — Real Estate Investment Trusts
Chapter 9 — Leaving the UK REIT regime
296

(5)
Anything done before cessation by or to a company so far as it carries on
property rental business in relation to an asset which is deemed under section
579(4) to be sold and reacquired is to be treated after cessation as having been
done by or to the post-cessation company.
(6)
This section is subject to section 559 (demergers: company leaving group UK
5
REIT).
Early exit
581
Early exit by notice
(1)
Subsection (6) applies if conditions A, B and C are met.
(2)
Condition A is that a group or company ceases to be a UK REIT as a result of a
10
notice under section 571.
(3)
Condition B is that the group or company had been a UK REIT for a continuous
period immediately before cessation of less than 10 years.
(4)
Condition C is that, during the post-cessation period, a relevant company, that
is to say—
15
(a)
in the case of a group, a member of the group, or
(b)
otherwise, the company,

disposes of an asset that was involved in property rental business of the
relevant company.
(5)
“The post-cessation period” means the period of two years beginning with the
20
date of cessation.
(6)
The relevant company’s liability to corporation tax is to be determined without
regard to—
(a)
any deemed disposal under section 536(2) that resulted in a gain,
(b)
any deemed disposal under section 555(2), or
25
(c)
any deemed disposal under section 579(4).
(7)
Subsection (6) also applies if—
(a)
a company ceases to be a member of a group UK REIT,
(b)
either—
(i)
the group has been a group UK REIT for a continuous period of
30
less than 10 years, or
(ii)
the company has been a member of the group for a continuous
period of less than 10 years, and
(c)
during the post-cessation period the company disposes of an asset that
was involved in its property rental business.
35
(8)
This section has effect in relation to a non-UK member of a group as if
references to property rental business were references to UK property rental
business.
582
Early exit
(1)
This section applies if—
40
(a)
a group or a company ceases to be a UK REIT as a result of section 572
or 578, and

Corporation Tax Bill
Part 12 — Real Estate Investment Trusts
Chapter 10 — Joint ventures
297

(b)
the group or company has been a UK REIT for a continuous period
immediately before cessation of less than 10 years.
(2)
An officer of Revenue and Customs may direct—
(a)
that a provision of this Part applies in relation to the group or company
with a specified modification, or
5
(b)
that a provision of an enactment relating to corporation tax applies,
does not apply or applies with modifications in relation to the group or
company.
(3)
A direction under subsection (2)(a) may in particular—
(a)
alter the time at which the group or company is to be taken to cease to
10
be a UK REIT in accordance with section 572 or 578;
(b)
disapply or alter the effect of section 534(1) or (2) or 535(1).
(4)
A direction under subsection (2)(b) may in particular prevent all or a specified
part of a loss, deficit or expense from being set off or otherwise used at all or in
a specified manner.
15
(5)
In the case of a group, a direction under subsection (2) may relate to the group
as a whole or to one or more members.
(6)
An appeal may be made—
(a)
in the case of a group in relation to which a direction is given, by the
principal company of the group,
20
(b)
in the case of a company in relation to which a direction is given, by the
company.
(7)
On an appeal under subsection (6) that is notified to the tribunal, the tribunal
may—
(a)
quash the direction,
25
(b)
affirm the direction, or
(c)
vary the direction.
Chapter 10
Joint ventures
Introduction
30
583
Overview of Chapter
(1)
This Chapter makes provision about how this Part applies in relation to
property rental business carried on—
(a)
by a joint venture company (as defined by section 584), or
(b)
by one or more members of a joint venture group (as defined by that
35
section).
(2)
Sections 586 and 587 are about the notice required for this Part to apply in
relation to the property rental business; it is the giving of the notice that makes
a group UK REIT or company UK REIT a venturing group or venturing
company (see section 585).
40
(3)
Sections 588 to 590 contain provision about the effect of the notice and its
duration.

Corporation Tax Bill
Part 12 — Real Estate Investment Trusts
Chapter 10 — Joint ventures
298

(4)
The remainder of the Chapter contains—
(a)
specific modifications and other provision relevant to the application of
this Part (see sections 591 to 594),
(b)
provision that in certain circumstances a joint venture company or a
member of a joint venture group is (or is not) liable to a further charge
5
to tax under section 538 (see sections 595 to 597), and
(c)
provision about the interpretation of this Chapter (see section 598).
584
Meaning of “joint venture company” and “joint venture group”
(1)
In this Chapter “joint venture company” means a company carrying on
property rental business (“the joint venture”) in circumstances where the
10
condition in subsection (3) is met.
(2)
In this Chapter “joint venture group” means a group of companies one or more
of which is or are carrying on property rental business (“the joint venture”) in
circumstances where the condition in subsection (3) is met.
(3)
The condition is that an interest in the joint venture is held—
15
(a)
by one or more members of a group UK REIT, or
(b)
by a company UK REIT.
585
Meaning of “venturing group” and “venturing company”
(1)
In this Chapter “venturing group” means a group UK REIT the principal
company of which has given a notice under section 586(1) or 587(1).
20
(2)
In this Chapter “venturing company” means a company UK REIT which has
given a notice under section 586(2) or 587(2).
Notice for Part to apply to joint venture
586
Notice for Part to apply: joint venture company
(1)
The principal company of a group UK REIT may give notice that this Part is to
25
apply (in accordance with this Chapter) in relation to property rental business
carried on by a joint venture company.
(2)
A company UK REIT may give notice that this Part is to apply (in accordance
with this Chapter) in relation to property rental business carried on by a joint
venture company.
30
(3)
A company may give a notice under subsection (1) or (2) only if the 40% tests
are met in relation to the joint venture company.
(4)
The 40% tests are met in a case within subsection (1) if members of the group
UK REIT are together beneficially entitled to—
(a)
at least 40% of the profits available for distribution to equity holders in
35
the joint venture company, and
(b)
at least 40% of the assets of the joint venture company available to
equity holders in the event of a winding up.
(5)
The 40% tests are met in a case within subsection (2) if the company UK REIT
is beneficially entitled to—
40

Corporation Tax Bill
Part 12 — Real Estate Investment Trusts
Chapter 10 — Joint ventures
299

(a)
at least 40% of the profits available for distribution to equity holders in
the joint venture company, and
(b)
at least 40% of the assets of the joint venture company available to
equity holders in the event of a winding up.
(6)
A notice under subsection (1) or (2)—
5
(a)
must specify the joint venture company concerned,
(b)
may be given only with the consent of that joint venture company,
(c)
must specify a date from which this Part is to apply in relation to the
property rental business, and
(d)
must be given in writing to an officer of Revenue and Customs before
10
the date specified under paragraph (c).
(7)
A company giving a notice under subsection (1) or (2) may do so—
(a)
at the same time as giving a notice under section 523 or 524 (as the case
may be), or
(b)
at any later time when the group or company (as the case may be) is a
15
UK REIT.
(8)
See section 588 for provision about the effect of a notice under this section.
587
Notice for Part to apply: joint venture group
(1)
The principal company of a group UK REIT may give notice that this Part is to
apply (in accordance with this Chapter) in relation to property rental business
20
carried on by one or more members of a joint venture group.
(2)
A company UK REIT may give notice that this Part is to apply (in accordance
with this Chapter) in relation to property rental business carried on by one or
more members of a joint venture group.
(3)
A company may give a notice under subsection (1) or (2) only if the 40% tests
25
are met in relation to the joint venture group.
(4)
The 40% tests are met in a case within subsection (1) if members of the group
UK REIT are together beneficially entitled to—
(a)
at least 40% of the profits available for distribution to equity holders in
the principal company of the joint venture group, and
30
(b)
at least 40% of the assets of the principal company of the joint venture
group available to equity holders in the event of a winding up.
(5)
The 40% tests are met in a case within subsection (2) if the company UK REIT
is beneficially entitled to—
(a)
at least 40% of the profits available for distribution to equity holders in
35
the principal company of the joint venture group, and
(b)
at least 40% of the assets of the principal company of the joint venture
group available to equity holders in the event of a winding up.
(6)
A notice under subsection (1) or (2)—
(a)
must specify the principal company of the joint venture group
40
concerned,
(b)
may be given only with the consent of that principal company,
(c)
must specify a date from which this Part is to apply in relation to the
property rental business, and

Corporation Tax Bill
Part 12 — Real Estate Investment Trusts
Chapter 10 — Joint ventures
300

(d)
must be given in writing to an officer of Revenue and Customs before
the date specified under paragraph (c).
(7)
A company giving a notice under subsection (1) or (2) may do so—
(a)
at the same time as giving notice under section 523 or 524 (as the case
may be), or
5
(b)
at any later time when the group or company (as the case may be) is a
UK REIT.
(8)
See section 589 for provision about the effect of a notice under this section.
Effect and duration of notice
588
Effect of notice under section 586
10
(1)
If a notice is given under section 586(1), this Part applies in relation to the
property rental business carried on by the joint venture company as if the
company were a member of the venturing group.
(2)
If a notice is given under section 586(2), this Part applies in relation to the
property rental business carried on by the joint venture company as if the
15
venturing company and the joint venture company were the members of a new
group UK REIT (a “deemed UK REIT”).
(3)
For the purposes of subsections (1) and (2) references in this Part to a company
which is a member of a group UK REIT include references to—
(a)
the joint venture company, and
20
(b)
in a case within subsection (2), the venturing company.
(4)
For the purposes of subsection (3)—
(a)
references in this Part to a UK company which is a member of a group
UK REIT include references to a joint venture company which—
(i)
is UK resident, and
25
(ii)
is not resident in another place in accordance with the law of
that place relating to taxation, and
(b)
references in this Part to a non-UK company which is a member of a
group UK REIT include references to a joint venture company which is
not within paragraph (a).
30
(5)
For the purposes of subsections (1) and (2) any reference in this Part to—
(a)
entry, or
(b)
a company becoming a member of a group UK REIT,

is to be read in relation to the joint venture company as a reference to the date
specified under section 586(6)(c).
35
(6)
For the purposes of subsection (2)—
(a)
references in this Part to a UK REIT (or group UK REIT) include
references to the deemed UK REIT, and
(b)
references in this Part to the principal company of a group are to be
read as references to the venturing company.
40