IFM22010 - Real Estate Investment Trust : Conditions And Tests: Company Conditions: Conditions A-C: CTA2010/S528(1) - (3)

The conditions for joining the REIT regime are set out in CTA2010/S528.

Company Conditions A and B are the conditions the company/ principal company must meet before giving notice that it wants to join the regime. They are set out in CTA2010/S528(1) and (2). Failure to meet either of these conditions prevents a company or group from joining the regime. The conditions must be met at all times the company or group is in the regime, and failure to meet Conditions A and B results in a company/group leaving the regime automatically from the end of the previous accounting period (CTA2010/S578).

The company/ principal company does not have to meet Company Condition C before giving notice to join the regime. Thus a company whose shares are not currently admitted to trading on a recognised stock exchange is able to join the regime but it still is required that its shares are admitted for at least part of the first day and the remainder of the accounting period specified in the Notice under either CTA2010/S523 or S524 (see IFM23010).

Company Condition A - UK resident

This condition is that the company/ principal company is a company resident in the UK and is not resident in another state for tax purposes.

For purposes of the UK-REIT legislation, ‘company’ takes the TCGA1992/S170(9) meaning (see CG45105) which includes bodies incorporated under an act of law, such as the Companies Act 2006. Although that definition includes industrial and provident and friendly societies, other conditions of the regime mean they cannot be UK-REITs.

‘UK resident’ takes its normal tax meaning as set out in CTA2009/S14 ( INTM120030). As well as being resident in the UK under UK tax law, a company may be treated as resident of another state according to their laws. Such a ‘dual resident’ company would not meet Company Condition A unless there is a DTA in place between the UK and the other state, the DTA has a tie-break clause, and the tie-break clause allocates residence to the UK (see INTM120070).

Note that some double tax treaties (like the UK-Isle of Man (IoM) DTA) do not have tie-break clauses. This would mean that a company that was for instance, incorporated in the IoM (and thus IoM resident for IoM tax purposes) but had its management and control in London (and thus UK-resident for UK tax purposes) would fail Company Condition A.

Conversely a company incorporated in Jersey may not fail Condition A as incorporation in Jersey does not necessarily mean that the company is Jersey resident.

Guidance on company residence can be found in the International manual at INTM120000 onwards.

Company Condition B - closed-ended

This condition is that the company is not an open-ended investment company (OEIC) within FSMA2000/S236.

It follows that any vehicle with variable capital set up within or outside the UK cannot be a UK-REIT.

Company Condition C - shares admitted to trading on a recognised stock exchange

The definition of ‘recognised stock exchange’ is at ITA2007/S1005 and a list of the exchanges that have been recognised by HMRC can be found at Gov.uk link . When opting into the REIT regime companies are required to confirm that they will be admitted to trading on a recognised stock exchange on day 1.

Additional condition relating to shares

To remain within the regime a further condition relating to shares must be met in each accounting period. The company shares must either be “listed” on a recognised stock exchange or, during the accounting period, shares forming part of the company’s ordinary share capital must be traded on a recognised stock exchange. (CTA2010/S528A). However the requirements for this condition are treated as met in the first 3 accounting periods provided they are met on or before the last day of the 3rd accounting period of the company.

To be traded on a stock exchange means that shares must have changed hands on the exchange during the accounting period.

HMRC recognise that in certain cases markets use terms such as ‘listed’, ‘admitted to trading’, or ‘quoted’. Please refer to Tables 1 and Table 2 in HMRC’s guidance on Recognised stock exchanges available here.