IFM28075 - Real Estate Investment Trust : Distributions: administration: attribution: example

Company C has an accounting date of 31 December and becomes a UK-REIT on 1 January 2015. At that date its distributable reserves, including 2014 profits, were 1,000, of which 900 related to income and 100 arose from disposals. In February 2015, C declares a final distribution of 800 in respect of the previous year’s profits.

The accounts for 2015 show profits of 1,200 of which the company estimates 1,000 relates to income of its property rental business. No interim distribution is paid in 2015, and a final distribution of 1,150 is declared and paid in February 2016.

An interim distribution for the year ended 31 December 2016 of 600 is declared and paid in September 2016. The annual accounts for 2016 show profits of 1,500 of which the company estimates 1,300 relates to income of its property rental business. A final distribution of 680 is declared and paid in March 2017.

An interim distribution for the year ended 31 December 2017 of 750 is declared and paid in September 2017.

The six categories for attributing distributions are as follows:

(a) 100% of UK-REIT investment profits

(aa)90% distribution requirement

(b) income from taxable activities (i) pre-entry and (ii) post-entry

(c) profits of the property rental business

(d) relevant non-chargeable gains

(e) other (i) pre-entry and (ii) post entry

Attribution of profits and distributions

The final distribution in respect of 2014 relates to profits arising out of pre-entry business. C pays out all of this as a normal dividend, and attributes all 800 to (b) leaving the balance of that category to carry forward as 100. The other balance to carry forward is 100, relating to (e).

Of the 1,200 profit for 2015, 200 relates to (b). Of the 1,150 distribution paid in February 2016, 900 (being 90% of 1,000) is attributed to (aa). C decides to pay as much normal dividend as it can so attributes the remainder to (b).

At the 2016 interim, C decides to pay 540 (90% of the 600 interim distribution) as a PID earmarked to (aa), and the balance of the interim distribution (60) is paid as a non-PID and earmarked to (b).

Profits for 2016 are 1,500 of which 1170 relates to (aa), 200 to (b) and 130 to (c).

The March 2017 dividend is attributed 630 to (aa) (to clear the remainder of the 2016 90% mandatory PID) and the balance of 50 is attributed to (b) and paid as a non-PID.

At the 2017 interim, C decides to pay 675 (90% of the 750 interim distribution) as a PID. The balance of 75 is earmarked to (b).

This example is summarised in tables in IFM28085 to IFM28095.