GREIT08053 - Distributions: attribution rules: first accounting period as a UK-REIT: example

Company joins the regime 1 January, normal accounting date 31 December

Company C has distributable reserves of 1,000 at 31 December 2006, the end of its final pre- entry accounting period. In February 2007, C declares a final distribution for 2006 of 800. This is all payable as a normal dividend. The pot of reserves brought forward is 200, made up of (b) 150 ‘income from taxable activities’ and (e) 50 ‘other’.

In July, C declares an interim distribution of 650. To be sure of meeting the 90% requirement at the year end, C decides to pay 540 of the interim distribution, earmarked as Category (a) (as a PID) and 110 as a normal dividend.

For its first accounting period as a UK-REIT, the year to 31 December 2007, the income of C (tax-exempt) is 1000 and C (residual) is 100. C decides to pay a final distribution of 400 in February 2008 and chooses not to attribute any of this to 2008 profits. No further distributions are planned during 2008.

For the accounting period ending 31 December 2007, C must meet the 90% requirement by reference to the tax-exempt income of the whole period. For the full year, income of C (tax- exempt) is 1,000 and 100 for C (residual), so the total Category (a) in respect of that accounting period is 900. The total distributions paid from the start of the accounting period to the CTSA filing date (31 December 2008) is 800 + 650 + 400. Of this, 540 has already been paid as Category (a) so of the final distribution, 360 must be Category (a).

C decides to attribute the remainder to (b) ‘income from taxable activities’, so pays a normal dividend of 40.

The pot of reserves carried forward is 250, and will be made up of (b) 100, (c) 100 and (e) 50.

Reconciliation for a.p.e. 31 December 2007

Reconciliation for a.p.e. 31 December 2008