Introduction Overview Chapter 3: Tax treatment of profits and gains of UK REITs Section 534: Profits
1663.This section sets out the tax treatment of profits of property rental business and residual business. It is based on sections 119 and 134(1) of, and paragraphs 17 and 32(4) of Schedule 17 to, FA 2006.
1664.Subsection (1) provides that profits of property rental business of a UK company (including a UK joint venture company) which is, or is a member of, a UK REIT are not charged to corporation tax.
1665.Subsection (2) provides that profits of UK property rental business of a non-UK member of a group UK REIT (including a non-UK joint venture company) are not charged to corporation tax.
1666.Subsection (3) provides that profits of residual business of a UK company which are charged to corporation tax are charged at a rate determined without reference to the small profits reliefs in sections 18 to 23 of this Act: those profits are charged at the main corporation tax rate.
1667.Subsection (3)(b) makes clear that subsection (3) is not a charging provision. The rule in this subsection applies only if the profits are already charged to corporation tax by another rule.
1668.Subsection (3) does not apply to non-UK companies (including non-UK joint venture companies). This is because the whole of section 119 of FA 2006 is disapplied by paragraph 17 of Schedule 17 to FA 2006 but only section 119(1) is reinstated by paragraph 32(4) of the Schedule.
1669.For non-UK companies subject to income tax, the normal tax rule is that they are charged to income tax at the basic rate under Chapter 2 of Part 2 of ITA on profits of residual business.
1670.Subsection (4) expands what is treated as profits of residual business for the purposes of corporation tax (and so charged to corporation tax at the main rate) to include the non-member percentage of profits which are excluded from the financial statements under section 533(3).
1671.Subsection (4) also applies to joint venture companies (including non-UK joint venture companies). So a percentage of profits of property rental business attributable to a non-member of a joint venture company is subject to tax at the main rate of corporation tax.