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Amendment of Part 25A of Principal Act (real estate investment trusts)
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29. (1) Part 25A of the Principal Act is amended—
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(a) by inserting the following section after section 705H:
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“Profit: calculating profits available for distribution
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705HA. ((1) This section applies to any amount taken into account by a REIT or group REIT, in computing its aggregate profits, in respect of any disbursement or expense, not being money wholly and exclusively laid out or expended for the purposes of the property rental business (referred to in this section as the ‘disallowed amount’).
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(2) The REIT or the principal company of the group REIT, as the case may be, shall be treated as receiving an amount of income equal to the disallowed amount.
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(3) The amount of income referred to in subsection (2) shall be chargeable to corporation tax under Case IV of Schedule D and shall be treated as income—
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(a) arising in the accounting period in which the disallowed amount was taken into account, and
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(b) against which no loss, deficit, expense or allowance may be set off.”,
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(b) by inserting the following section after section 705I:
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“Disposals and reinvestments
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705IA. (1) This section applies where a REIT or group REIT disposes of a property of its property rental business.
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(2) In this section—
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(a) subject to paragraph (b), ‘net proceeds’, in relation to the disposal of the property of the property rental business, means the full proceeds from such disposal as reduced by any amount used to repay, in whole or in part, specified debt to the extent that the specified debt being repaid was employed in the acquisition, enhancement or development of the property being disposed of;
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(b) where the reference to the expression ‘net proceeds’ (in relation to such disposal) occurs for the purposes of subsection (3)(ii), that reference shall be deemed to be a reference to an amount that is equal to the net proceeds (in relation to such disposal) as that expression is to be construed by virtue of paragraph (a).
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(3) Where the net proceeds from the disposal of the property are not—
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(a) invested in the acquisition of a new property for use in the REIT’s or group REIT’s property rental business,
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(b) invested in the development or enhancement of a property held for use in the REIT’s or group REIT’s property rental business, or
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(c) distributed to the shareholders of the REIT or the shareholders of the principal company of the group REIT, as the case may be,
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before—
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(i) the expiry of the period referred to in section 705I(2) (in this subsection referred to as the ‘first-mentioned period’) or, if earlier than that expiry, the date specified in a notice given under subsection (1) or (4) of section 705O (in this subsection referred to as the ‘specified date’), or
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(ii) for the purposes of satisfying the condition specified in paragraph (a) or (b), the expiry of the period of 12 months beginning prior to the date of disposal of the property,
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then any amount not so invested or distributed shall, for the purposes of applying the condition specified in section 705B(1)(b)(vi) and for the purposes of section 705N(a), be treated as property income of the REIT or group REIT arising in the accounting period in which the first-mentioned period expires or the specified date falls.
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(4) Subsections (2) and (3) of section 172D, and subsection (4) of section 153, shall not apply to any distribution of the proceeds of a disposal referred to in subsection (1).”,
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and
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(c) in section 705P(2) by substituting for “Where a notice is given under subsection (1) or (4) of section 705O, the assets of the REIT or group REIT” the following:
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“Where—
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(a) a notice is given under subsection (1) or (4) of section 705O, and
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(b) at the time of the giving of that notice, not less than fifteen years have elapsed from the date the REIT or group REIT became such under section 705E(4),
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the assets of the REIT or group REIT”.
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(2) Subsection (1)(a) shall have effect from 1 January 2020.
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(3) Paragraphs (b) and (c) of subsection (1) shall apply to disposals made after 8 October 2019.
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