Introduction Overview Chapter 2: Requirements for being a UK REIT Section 529: Conditions as to property rental business
1636.This section sets out the conditions which need to be satisfied by a group or company in respect of its property rental business. It is based on sections 107(1), (3), (4) and (6), of, and paragraph 6(1) of Schedule 17 to, FA 2006.
1637.Subsections (1) and (2) provide that the “property rental business” (defined in section 519) must comprise at least three properties with no single property accounting for more than 40% of the total value of the properties involved in the business.
1638.Subsection (3) provides that, for the purposes of this section, the property rental business of a group is treated as single business.
1639.For the purposes of the conditions in subsections (1) and (2), all worldwide properties of non-UK companies are taken into account. This is because paragraph 6(1) of Schedule 17 to FA 2006 provides that “for the purposes of section 107(1) the property rental businesses of the members of the group shall be treated as a single business”.
1640.Paragraph 32(2) of Schedule 17 to FA 2006 provides that “business carried on by a non-UK resident company is property rental business for the purposes of this Part if the business would be property rental business within the meaning given by section 104 [of FA 2006] if it were carried on by a UK resident company”. So the property rental business includes the worldwide property rental business of non-UK companies. By including the worldwide property rental business of non-UK companies, condition A in section 529 is easier to satisfy. But condition B in section 529 may, depending on the circumstances, be more difficult to satisfy, for example where a non-UK company has an overseas property worth more than 40% of the total value of the properties involved in the property rental business.
1641.Subsection (5) excludes a percentage of the property rental business carried on by a subsidiary which is not wholly owned by the group UK REIT. The percentage is the percentage of the business excluded from the financial statements in accordance with section 533. See Change 42 in Annex 1.