The exemptions from tax provided by Real Estate Investment Trust legislation can apply only to members of a group of companies as defined in section 134 FA 2006. This definition follows closely the section 170 TCGA definition of ‘group of companies’. It consists of a parent company (referred to as the ‘principal company’ of a Group REIT), its ‘75% subsidiaries’ and their 75% subsidiaries, provided they are all ‘effective 51% subsidiaries’.
Although the principal company is required to be UK resident, there is no restriction on the state of residence of other members of the group, nor on the countries in which they carry on their activities.
The definition of ‘75% subsidiary’ is as set out in section 838 ICTA (ownership, directly or indirectly, of 75% or more of the ordinary share capital). ‘Effective 51% subsidiary’ has the same meaning as given by section 170 TCGA (the parent is beneficially entitled to 50% of distributable profits, and would be entitled to 50% of the assets on winding-up). For more detail on these definitions, see CGM45101 onwards.
‘Company’ takes the same meaning as set out in section 170(9) TCGA, which is broadly a company incorporated under UK or other law, a friendly society and a building society. Other bodies that are within the charge to corporation tax (such as a sports club or authorised unit trust) do not come within this definition. Whether or not account is taken of their activities, assets and income for the various regime tests and conditions will depend on the nature of the body – see GREIT09015 for more detail.
Other than in certain limited circumstances, a company cannot be a member of more than one Group REIT. The exception to this is where the company is the vehicle used to carry on a joint venture, and the principal company has made a ‘Joint Venture Look-Through’ election (see GREIT13015) in respect of its interest in the company.