Introduction Overview Chapter 5: Assets etc Section 541: Ring-fencing of property rental business
1698.This section provides that, for corporation tax purposes, property rental business (or UK property rental business in the case of non-UK companies) is treated as a separate business from any other business carried on by a group UK REIT or by a company UK REIT. Also, to the extent that the UK REIT carries on such a business, it is treated as a separate group or company from the rest of the group or company. This section is based on sections 113(1) to(4) and 134(1) of, and paragraphs 12 and 32(3) of Schedule 17 to, FA 2006.
1699.Subsections (1)and (8) provide that this section applies to a group UK REIT, each member of the group (including a non-UK company) and a company UK REIT. See Change 41 in Annex 1.
1700.This section ring-fences the property rental business, rather than the “tax-exempt business”. This avoids the problem of how the section applies in a case where the company or group breaches the property rental business conditions in section 529. Such a breach apparently leads to the company or group no longer having “tax-exempt business” for the purpose of section 113 of FA 2006.
1701.This section applies to joint venture companies (including non-UK joint venture companies which are subject to corporation tax).
1702.Subsection (7) provides that if a percentage of the profits of property rental business are excluded from the financial statements because they are attributable to a non-member, that percentage is treated as profits of residual business.