Chapter IFM22072

Published date05 July 2019
Record NumberIFM22072
CourtHM Revenue & Customs

The property rental profits requirement in Condition A was set at 75% to provide sufficient margin to allow for other activities to take place without affecting the tax-exempt status of the REIT. However, to prevent distortion of the result, in applying the test CTA2010/S531(4)(c) excludes items that are outside the ordinary course of the REITs business, (irrespective of the treatment in the accounts), having regard to the group or company’s past transactions.

It is a question of fact, depending on the business, as to what is within its ordinary course. Where there is a history of an activity it will be less likely that similar activity can then be viewed as outside the ordinary course of that business, factors to be considered include the scale and nature of the activities. Where a business undertakes property development for sale similar in scale to previous development, it may be sufficiently different in nature as to be outside the ordinary course of business. Likewise activity similar in nature may be sufficiently different in scale to be outside the ordinary course of business.

Examples

1. A single trading transaction by a property group / company selling property, developed for sale, with no, or a limited, history of such activity will be outside the ordinary course of business. A limited history may...

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