The activities of entities other than group members are reflected in the financial statements for G (property rental business) and G (residual) in one of two ways, depending on nature of the vehicle and the level of influence members of the group have over it. One way broadly treats the wrapper as transparent and takes account of the activities carried on by the entity: the other treats the entity as opaque (see GREIT12130).
For entities that are treated as transparent, the contributions
of the entity to the financial statements of G (property rental
business) and G (residual) are shown in the same way as that of 75%
subsidiaries. The assets owned by the entity and the income,
expenses etc arising on the activities carried on by the entity are
divided between G (residual) and G (property rental business)
depending on the nature of the activities. Note that this treatment
does not imply that the entities are members of the group for tax
This treatment applies to the following entities:
This means that some entities that are treated as opaque for tax
purposes will be treated as transparent in the preparation of the
financial statements of G (property rental business) and G
(residual). However, this treatment of the income arising and of
assets held by the entity for the Balance of Business Conditions
does not extend to calculation of tax-exempt profits.
For example, a member of a Group REIT has a 20% interest in an OEIC that owns a property, valued at 1,000 and generating rental profit of 60 and with cash on deposit of 400, yielding interest at 5%. The financial statement G (property rental business) will show a property valued at 200 (being 20% of 1,000 property owned by the OEIC) and rental income of 12 (being 20% of 60 rental income arising to the OEIC). The financial statement G (residual) will show an asset valued at 80 (being 20% of 400) and income of 16 (being 20% of 80). The group member with the interest in the OEIC will not have any income arising to its tax-exempt business in respect of its interest in the OEIC. It will instead have a dividend of 28 arising to the residual part of its business, but it is tax-exempt because it is an ordinary company dividend.
This table at GREIT12140 summarises the treatment of various types of vehicles.