Members of the group may have less than 75% interests in other companies and interests in vehicles that are not companies, such as LLPs and unit trusts. This does not prevent the group from being a Group REIT, but the tax-exemption and other rules that apply to companies that are members of the group as defined, do not apply to these other companies and may not apply to other vehicles, depending on its legal nature.
Regardless of the percentage interest held in them, certain types of company are not allowed to be part of a Group REIT, either as the principal company or as a member of the group. These are:
Note that this reference to ‘open-ended investment
company’ is
not restricted just to those that fall within the
section 236 Financial Services and Markets Act 2000 definition.
If members of the group have interests in excluded companies,
then the interest is treated as an asset of the residual or
non-ring fence business of the group and any dividend arising from
the shares is residual income.
Members of the group may have insufficient interest in a company
for it to be a 75%/ effective 51% subsidiary. Again, the group can
be a Group REIT, but the group’s interest in the company is
treated as an asset of the residual or non-ring fence business of
the group and any dividends arising from the shares are residual
income. This is regardless of the nature of the activities carried
on by the company.
The exception to this rule is where the company is a joint
venture for which a ‘look through’ election has been
made. These can be made where the Group REIT owns 40% or more of
the company and the company itself carries on mainly property
rental business (see
GREIT13015).
Having interests in other types of vehicle does not prevent a group of companies that otherwise meets the definition in section 134 FA 2006 from being a Group REIT. How the interest in the vehicle and the underlying income and assets are treated depends on the nature of the vehicle – see GREIT09015.
