GREIT11315 – Groups: leaving the regime: effects of cessation: on availability of tax relief for losses

Losses etc relating to the tax-exempt property businesses cannot be carried forward for use in working out profits of any post-REIT property business. This is because the tax-exempt property rental business of the group members is treated as ceasing once the group leaves the regime.

Neither can losses arising in the first accounting period of post-cessation business be carried back to reduce profits of accounting periods before the group left the regime. This is because post-REIT property business is a different business, carried on by a different person (since the tax-exempt part of each group member is deemed to be a company separate from the company post-cessation.

To the extent that a group member, while the group was a UK-REIT, carried on activities other than property rental, these are regarded as a business that carries on uninterrupted, before, during and after the group is in the regime. If the group member had a Case I loss in the final accounting period before the group leaves the regime, that loss can be carried forward in the normal way and used against profits of the trade as carried on by it after the group has left the regime.

If a group member has unused capital losses, including losses on disposal of non-ring fence assets while the group was in the regime and losses that arose on pre-entry disposals of rental property, they can be carried forward and used to reduce chargeable gains that may arise to the group member post-cessation. This is because the group member pre-entry, the residual part while the group was a UK-REIT and post-cessation are not deemed to be separate companies or members of separate groups.