Company C has an accounting date of 31 December and becomes a
UK-REIT on 1 January 2007. At that date its distributable reserves,
including 2006 profits, were 1,000, of which 900 related to income
and 100 arose from disposals. In February 2007, C declares a final
distribution of 800 in respect of the previous year’s
profits.
The accounts for 2007 show profits of 1,200 of which the
company estimates 1,000 relates to income of its tax-exempt
business. No interim distribution is paid in 2007, and a final
distribution of 1,150 is declared and paid in February 2008.
An interim distribution for the year ended 31 December 2008
of 600 is declared and paid in September 2008. The annual accounts
for 2008 show profits of 1,500 of which the company estimates 1,300
relates to income of its tax-exempt business. A final distribution
of 680 is declared and paid in March 2009.
An interim distribution for the year ended 31 December 2009
of 750 is declared and paid in September 2009.
The five categories for attributing distributions are as
follows:
(a) 90% distribution requirement
(b) income from taxable activities (i) pre-entry and (ii)
post-entry
(c) income of property rental business
(d) tax-exempt gains of property rental business
(e) other (i) pre-entry and (ii) post entry
The final distribution in respect of 2006 relates to profits
arising out of pre-entry business. C pays out all of this as a
normal dividend, and attributes all 800 to (b) leaving the balance
of that category to carry forward as 100. The other balance to
carry forward is 100, relating to (e).
Of the 1,200 profit for 2007, 200 relates to (b). Of the
1,150 distribution paid in February 2008, 900 (being 90% of 1,000)
is attributed to (a). C decides to pay as much normal dividend as
it can so attributes the remainder to (b).
At the 2008 interim, C decides to pay 540 (90% of the 600
interim distribution) as a PID earmarked to (a), and the balance of
the interim distribution (60) is paid as a non-PID and earmarked to
(b).
Profits for 2008 are 1,500 of which 1170 relates to (a), 200
to (b) and 130 to (c).
The March 2009 dividend is attributed 630 to (a) (to clear
the remainder of the 2008 90% mandatory PID) and the balance of 50
is attributed to (b) and paid as a non-PID.
At the 2009 interim, C decides to pay 675 (90% of the 750
interim distribution) as a PID. The balance of 75 is earmarked to
(b).
This example is summarised in tables in
GREIT08085 to
GREIT08095.
