IFM24029 - Real Estate Investment Trust : Property rental business losses

It may seem strange to keep track of losses within a tax free regime. However as the figure of tax exempt income of the property rental business provides the basis for the distribution requirement it is necessary to give effect to losses in that calculation.

The profits under CTA2010/S599 are calculated in the same way as profits of a UK property business are calculated for the purposes of the charge to tax under CTA2009/Part 4/Chapter 3. It follows that:

·       losses of the exempt property rental business brought forward from previous accounting periods are deducted in arriving at the profits of the property rental business in the UK, as provided for by CTA2010/S62(5). However the loss restriction provisions at CTA2010/Part7ZA do not apply to the property rental business (CTA2010/S599(9)).

·       property rental business losses may be group relieved within the ring-fenced property rental business under CTA2010/Part5.

Note however that profits for the profit financing cost ratio (CTA2010/S543) does not take account of losses brought forward (CTA2010/S544(2)(b)).