Introduction Overview Chapter 3: Tax treatment of profits and gains of UK REITs Section 535: Gains
1672.This section sets out how gains of property rental business and residual business are taxed. It is based on section 124, 127 and 134(1) of, and paragraphs 21 and 32(6) of Schedule 17 to, FA 2006.
1673.Subsections (1) to(3)and (8) provide that gains made by a company (including a joint venture company) which is, or is a member of, a UK REIT from property rental business are not chargeable gains.
1674.Subsections (4), (5) and (8) provide that if an asset is used partly for the purposes of property rental business (or UK property rental business in the case of a non-UK company), the gain attributable to the property rental business/UK property rental business is not a chargeable gain. These subsections also apply to joint venture companies.
1675.Subsection (6) provides that gains of residual business which are subject to corporation tax are charged at the main corporation tax rate.
1676.Subsection (6)(b) makes clear that subsection (6) is not a charging provision. The rule in this subsection applies only if the profits are already charged to corporation tax by another rule. See Change 41 in Annex 1.
1677.Subsection (6) also applies to joint venture companies (including non-UK joint venture companies). So a percentage of gains arising from property rental business attributable to a non-member of a joint venture company is subject to tax at the main rate of corporation tax.
1678.Subsection (7) expands what is treated as gains of residual business (and so potentially subject to corporation tax at the main rate) to include the non-member percentage of gains which are excluded from the financial statements under section 533(3). Subsection (7) applies also to non-UK companies and non-UK joint venture companies.