GREIT03010 - Entry to the regime: notice to join

If a company decides it wants to join the regime, the company must provide a notice to HM Revenue & Customs specifying the accounting period from the beginning of which it wants the Real Estate Investment Trust legislation to apply (section 109(1) FA 2006). If the relevant conditions are met, the regime will apply to the company from the first day of the accounting period specified in the notice (and not on the day the notice is given).

The notice should be sent to the tax office that normally deals with the company and a copy sent to:

Mike Luty
HMRC Leeds Large Business Service
I Munroe Court
White Rose Office Park
LEEDS LS11 0EA

'Accounting period' takes its normal CT meaning, so the date specified in the notice need not be by reference to the company's normal accounting reference date. For example, a company draws up its accounts to 31 March, but wants to join the regime with effect from 1 January 2007. The company need not change its accounting reference date, but the accounts to 31 March 2007 will be divided into two accounting periods for CT purposes. One will run from 1 April to 31 December 2006, and cover all the pre-REIT activities of the company. The other will cover 1 January to 31 March 2007. For this period, two separate computations will be required, one covering the tax-exempt activities of the company; the other dealing with the remainder.

Conditions to be met to give notice

To give notice, the company has to meet Company Conditions 1 to 3 of section 106 FA 2006. These are:

• the company must be UK resident
• its shares must be listed on a recognised stock exchange, and
• the company is not an open-ended investment company.

For more detail on Company Conditions 1 to 3, see GREIT02010.

Contents of the notice

The notice must be given in writing, and it must be given before the start of the accounting period from which the company wants to join the regime.

The notice must be accompanied by a statement that the company reasonably expects all the Company Conditions in section 106 will be satisfied for the accounting period specified in the notice. The other three conditions are:

• the company must not be 'close'
• it has only one class of ordinary share capital in issue and no other classes of shares apart from non-voting fixed rate preference shares, and
• it is not party to any loans where the rates are dependent on the profits of the business.

For more detail on Company Conditions 4 to 6, see GREIT02015.

Initial failure of ‘close’ company condition

Where section 109(3) FA 2006 applies (see GREIT02015) the statement required will provide that the company reasonably expects Company Conditions 1,2, 5 and 6 to be satisfied for the accounting period specified in the notice.

Where a company’s shares are not listed before giving notice to join the regime, the company may still be entitled to join provided that it is able to provide the statement that it reasonably expects to satisfy Company Condition 3 for at least a part of the first day of the accounting period specified and the remainder of that accounting period.

Furthermore where the company does not meet the ‘not close’ requirement in Company Condition 4 on the first day of the accounting period, the company may still qualify provided that it is able to confirm in the statement that the company reasonably expects Company Condition 4 to be satisfied for the accounting period specified apart from the first day.

Group REITs

The same requirements apply to the principal company of a group that wants to join the regime, but with the Company Conditions as modified for Group REITs (see GREIT11010 and GREIT11015). This means that 'reasonable belief' statement made by the principal company includes an additional condition, which is the requirement to produce financial statements for the group for each accounting period (see GREIT12100 onwards).