GREIT08033 - Distributions: attribution rules: category (c) - other income of the tax-exempt business: consequences of Category (b) choices: example
Facts for example 4
C becomes a UK-REIT on 1 January 2007, has no distributable reserves brought forward once it has paid out the final distribution for 2006 (which was all paid as a non-PID). For the accounting period ending 31 December 2007, the income of its tax-exempt business is 1,000, and is the same as the accounting measure of profit. The gains as measured for TCGA purposes and accounting profits on disposals of properties involved in the tax-exempt business are both 100. Taxable income from other activities is 130 and chargeable gains from other non tax-exempt activities are 70. The company’s income accrues evenly over the year. Distributable reserves in respect of 2007 are 1,300.
Example 4
Using the facts in Example 1(1) in GREIT08023, C has decided not to allocate the excess over the 90% requirement entirely to ‘taxable income’. C has two choices.
- C may decide to attribute none to Category (b). In this case
the balance of 50 is a PID, attributed to income of the tax-exempt
business and payable under deduction of basic rate tax (other than
for gross payment cases – see
GREIT08125). The 350 distributable
reserves to carry forward will be made up of (b) 130 income from
taxable activities, (c) 50 income from the tax-exempt business, (d)
100 gains from the tax-exempt business, and (e) 70 other reserves.
- C may decide to attribute only 30 of the balance to Category (b). The remaining 20 is therefore attributable to (c) income of the tax-exempt business, and is a PID and payable under deduction of basic rate tax (other than for gross payment cases – see GREIT08125). The 350 distributable reserves to carry forward will be made up of (b) 100 income from taxable activities, (c) 80 income from the tax- exempt business, (d) 100 gains from the tax-exempt business, and (e) 70 other reserves.
