Annex 1: Minor changes in the law Change 44: UK REITs: notional amount charged following breach of condition: exclusion of non-member’s interest: section 567
This change excludes from the total market value of a group’s assets the value of the percentage of those assets held by a non-member of the group.
If there is a breach of Condition 2 in section 108(3) of FA 2006 (balance of business: assets involved in tax-exempt business) a charge to tax is imposed by regulation 7A of SI 2006/2864 (inserted by regulation 5 of SI 2007/3540). The amount of the charge is based on the market value of the assets involved in the UK property rental business of G (property rental business).
Some of those assets may be held by a company in which a non-member of the group has an interest. In that case, the non-member’s percentage of the assets may be excluded from the financial statements prepared under paragraph 31 of Schedule 17 to FA 2006 (see, in particular, sub-paragraph (5)).
Section 567 of this Act rewrites the rule in regulation 7A of SI 2206/2864. It includes, in subsection (4)(c) of the section, a rule excluding a non-member’s share in the assets of the group. The exclusion is on the same basis as that for the purposes of financial statements (see section 533(3)).
This change reduces the amount that may be charged to tax on the occasion of a breach of the balance of business (assets) condition.
This change is in taxpayers’ favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small.