IFM26025 - Real Estate Investment Trust : Leaving the regime: exit by HMRC notice: CTA2010/S572

An officer of HMRC may issue a notice to a UK-REIT (to the company/principal company) that the regime will cease to apply to it (CTA2010/S572). The circumstances in which this may be done are: 

  • CTA2010/S573, the UK-REIT has been given two notices under the provisions of CTA2010/S545 (cancellation of a tax advantage) (see IFM29300), or
  • CTA2010/S573A, condition D in CTA2010/S528 is not met in certain circumstances (see IFM27025), or
  • CTA2010/S573B, the condition in CTA201/S528A is not met in certain circumstances (see IFM27025), or
  • CTA2010/S574, a breach of conditions in CTA2010/S529 (conditions as to Property rental business), S530 (condition as to distribution of profits), S531 (conditions as to balance of business) or an attempt by the UK-REIT to obtain a tax advantage, is considered so serious (see IFM27060) that the group or company should cease to be a UK-REIT, or
  • CTA2010/S575 and 576, there is a breach of a regime condition under CTA2010/S529 (conditions as to the property rental business)(see IFM27030) or CTA2010/S531 (conditions as to the balance of business) (see IFM27060) in 3 consecutive accounting periods, or

  • CTA2010/S577, multiple breaches of chapter 2 conditions during a 10-year period, specified numbers apply to different applicable breaches, and some breaches do not count for this purpose. The rules for each condition are described in [An officer of HMRC may issue a notice to a UK-REIT (to the company/principal company) that the regime will cease to apply to it (CTA2010/S572). The circumstances in which this may be done are: 

  • CTA2010/S573, the UK-REIT has been given two notices under the provisions of CTA2010/S545 (cancellation of a tax advantage) (see IFM29300), or
  • CTA2010/S573A, condition D in CTA2010/S528 is not met in certain circumstances (see IFM27025), or
  • CTA2010/S573B, the condition in CTA201/S528A is not met in certain circumstances (see IFM27025), or
  • CTA2010/S574, a breach of conditions in CTA2010/S529 (conditions as to Property rental business), S530 (condition as to distribution of profits), S531 (conditions as to balance of business) or an attempt by the UK-REIT to obtain a tax advantage, is considered so serious (see IFM27060) that the group or company should cease to be a UK-REIT, or
  • CTA2010/S575 and 576, there is a breach of a regime condition under CTA2010/S529 (conditions as to the property rental business)(see IFM27030) or CTA2010/S531 (conditions as to the balance of business) (see IFM27060) in 3 consecutive accounting periods, or
  • CTA2010/S577, multiple breaches of chapter 2 conditions during a 10-year period, specified numbers apply to different applicable breaches, and some breaches do not count for this purpose. The rules for each condition are described in](https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm27005) onwards. 

 

Contents of notice

A notice issued under CTA2010/S572 must specify the reason for its issue. The date from which the regime is to cease to apply to the company/ group will be from the end of the accounting period before the one in which the event that triggered the issue of the notice occurred. 

For example, CTA2010/S576(2) allows a UK-REIT to rely on the breach provisions at CTA2010/S568 for the Balance of Business income test twice in a ten year period.  A company that joined the regime on 1 January 2007 breaches the income test a third time for accounting period ending 31 December 2015. The notice will specify that the regime ceases to apply to the company on 31 December 2014, since the event that triggers the notice (third breach of the income test) occurs in the accounting period ending 31 December 2015.  

However if the trigger event is within ten years of joining the regime, as in the example above, HMRC can direct that a different date of cessation applies – see IFM26035. 

 

Right of appeal 

When a company/principal company receives a notice from HMRC under CTA2010/S572, they can appeal against it. The appeal must be made in writing to HMRC within 30 days from the date on which the notice is issued. 

Any appeals against a CTA2010/S572 notice are to be dealt with by the First-tier Tribunal.