GREIT03030 - Entry to the regime: entry charge: indirect ownership of property
As well as owning property directly, the company or group members may have interests in vehicles that own property, such as companies, unit trusts, partnerships and joint ventures. This page sets out when property held via such entities is taken into account for the purposes of the Entry Charge. For more information on other aspects of indirectly held property, see GREIT09015 onwards.
Companies
A company
that has elected to join the regime as a single
company may have a 75%/ effective 51% subsidiary. For the
Entry Charge, no account is taken of property owned by that
subsidiary, unless there is a Joint Venture Look-Through notice in
place between the company that is a UK-REIT and the subsidiary (see
below and at
GREIT13000 onwards).
If the company has given notice to join the regime as the
principal company of a group, then the property owned by the
subsidiary company is taken into account for the Entry Charge, to
the extent group members have an interest in the subsidiary. The
charge arises to the subsidiary company.
Partnerships
When a company joins the regime, there will be a deemed sale and
reacquisition of its share of the property held by the partnership.
An Entry Charge will arise on the company by reference to the
aggregate market value of its share.
For example, company P (the principal company of a Group
REIT) and its 100% subsidiary S have, respectively, 20% and 25%
interests in a partnership. The market value of partnership
property on the date the group joins the regime is 30,000. The
Entry Charge notional income arising to P as a result of being a
partner is 400 (= 20% x 30,000/0.3 x 2%), resulting in a tax charge
for P of 120. The Entry Charge notional income arising to S as a
result of being a partner is 500 (= 25% x 30,000/0.3 x 2%),
resulting in a tax charge for S of 150.
Joint ventures
Unless there is Joint Venture Look-Through election (see above and at GREIT13000 onwards) in place between the company or group and the joint venture company, the legal nature of the vehicle through which the venture is carried out will determine the outcome. Where a Look- Through notice is in place, the property owned by the joint venture company is taken into account for the Entry Charge, to the extent the company that is the UK-REIT or members of the Group REIT have an interest in it. The charge arises to the joint venture company.
Authorised investment funds (AIFs)
For the Entry Charge, no account is taken of property held via an AIF, regardless of whether the AIF is constituted as an OEIC or a unit trust.
Non-resident unit trusts
There is no single answer that applies to all non-resident unit trusts. The answer will depend on whether they are regarded as transparent for income purposes (when the treatment is the same as for partnerships) or as opaque (when the treatment is the same as for companies which are not members of the group).
