COM40090 - Case records: setting up case records: UK-REITs (UK real estate investment trusts)
Setting up a UK-REIT (Tax-Exempt) company record
Background
The UK-Real Estate Investment Trusts regime (UK-REITs) was introduced by Part 4 FA2006. The legislation enables companies carrying on property rental business to benefit from exemptions from corporation tax on profits and gains of accounting periods (APs) starting on or after 1 January 2007.
A company that satisfies the relevant conditions can give a notice specifying the start of an AP from which it wants to enter the regime. On entry
- An AP of the company ends and another begins
- The property rental business of the company - ‘C (pre-entry)’ - ceases for corporation tax purposes
- The property rental business assets of C (pre-entry) are treated as sold and re-acquired at market value by another company - ‘C (tax-exempt)’
- C (tax-exempt) carries on the property rental business and any profits (and gains on disposal of properties used in that business) are not charged to corporation tax
- The remaining non tax-exempt business of C (pre-entry) is carried on by the company ‘C (residual)’
- Profits from the business of C (residual) which are charged to corporation tax are charged at a rate without reference to small companies rate (S13 ICTA 1988)
In effect, the original company splits into two companies for corporation tax purposes and an AP begins for each on the date of entry to the REIT regime.
- C (residual) has the same Unique Taxpayer Reference (UTR), Company Registration Number (CRN) and COTAX case record as C (pre-entry)
- C (tax-exempt) is set up as a new COTAX case record with its own UTR but no CRN as it is not registered at Companies House
Once the case record is set up for C (tax-exempt), COTAX creates APs as normal and issues notices to deliver a company tax return. Both companies are required to deliver company tax returns.
Groups of companies can also benefit from the exemptions in Part 4 FA2006, subject to modifications set out in Schedule 17 FA2006.
For more detailed information about UK-REITs see the Guidance on REIT manual (GREIT).
Who deals with UK-REITs?
UK-REITs are dealt with in Leeds LBS. If you are in another office, any items you come across in day to day work and all enquiries concerning UK-REITs should be referred (initially by telephone) to
Leeds LBS Real Estate Sector
Leeds
West Yorkshire
LS1 5RA
Tel. 0113 394 4930
Setting up a UK-REIT (Tax-Exempt) company record
If you work in Leeds LBS you need to set up a COTAX case record for each tax exempt (TE) company.
A Technical Caseworker will give you the name and address of the tax-exempt company together with the date of commencement and other details.
When you receive notification of a new tax-exempt company
- Use Function CCTP (Set Up New Company) to set the case up, making entries in the following fields on screen TXP001A
-
- Date of Commencement / Incorporation
- Intended First Accounting Date (if known)
- Company Status (select ‘R’ from the drop down list)
- Name (enter a suffix of ‘TE’ in place of ‘Ltd’ or ‘Plc’ for example Kelsall Estates TE)
-
- Note: The TE suffix helps to identify tax-exempt REIT companies and distinguish them from other unincorporated businesses
- Note: The TE suffix helps to identify tax-exempt REIT companies and distinguish them from other unincorporated businesses
-
- Address
- CT41G to be issued? (select ‘blank’ from the drop down list - form CT41G must not be issued)
Company type
Returns for C (residual) and C (tax-exempt) companies should include an entry in the Type of Company box on page 1 of form CT600 (Version 2) as follows
- 9 if the company is a (REIT) C - residual
- 10 if the company is a (REIT) C - tax-exempt
If necessary you can use Function MAPS (Maintain AP Signals) to enter or amend the Company Type as long as the AP has a return logged on it.
