Guidance: Apply to be a UK Real Estate Investment Trust

A Real Estate Investment Trust (REIT) is exempt from UK tax on the income and gains of its property rental business. Corporation Tax is payable on its profits and gains from any other activities.

As a REIT:

• you’ll pay at least 90% of your property rental business income to shareholders each year
• your investors will be taxed on this income as if they’ve received income from property directly

You’re a ‘property rental business’ when you make money from land for rent. It does not include money made from the occupation of land. This is chargeable as property business income — for example, farming or running a hotel are chargeable as trades so are not classed as a ‘property rental business’.

Who can apply

A company or principal company of a group can apply to be a REIT if it:

• has an existing property rental business of at least 3 properties, where no one property represents more than 40% of the total value of properties involved
• is UK resident for tax purposes
• is not an open ended investment company

How to apply

You must write to HMRC to apply to be a REIT before you can convert to REIT status. Email your application to reit.lb@hmrc.gov.uk, or post it to:

What to include in the notice

You must confirm the name of your company or principal REIT company, giving notice under section 524 Corporation Tax Act (CTA) 2010 that you wish to become a REIT and from which date you wish to receive REIT status.

You must also confirm you meet the following conditions for becoming a REIT.

Condition	Description	Legally obliged to include
Condition A	That your company or principal REIT company is a UK company under section 523(3) CTA, the date it was incorporated and the company registration number	Yes
Condition B	That your company or principal REIT company is not an open-ended investment company under section 236 FSMA 2000	Yes
Condition C	That your company or principal REIT company has shares traded on a recognised stock exchange and the date they were first traded, or that it meets the listing requirement exemptions	Yes
Condition D	That your company or principal REIT company is not a close company	No
Condition E	That each share issued by your company or principal REIT company forms part of the company’s ordinary share capital or is a non-voting restricted share and there is only one class of ordinary shares in issue	Yes
Condition F	That your company or principal REIT company is not party to any loans as a debtor where the loan creditor is entitled to an amount by way of interest which depends to any extent on the results of all or part of the company’s business or on the value of any of the company’s assets, the rate of interest exceeds a reasonable commercial return and the repayment amount does not exceed the consideration lent, or is a commercially comparable amount	Yes

It would also be helpful if you could tell us:

• if ‘Condition C’ is met because the listing exemptions in respect of ownership by institutional investors in section 528(3)(b) apply and provide further detail to support how the requirement has been met
• if ‘Condition D’ is not met by the date you wish to receive REIT status, details of plans in place to put this right and when you expect to meet the condition
• if there is an existing property rental business, that the conditions in section 529 CTA have been met
• the date by which your accounts will be prepared
• the start and end dates of the first accounting period
• if appropriate, a copy of the group structure including any known unique taxpayer reference numbers, any linked VAT registration numbers or PAYE scheme reference numbers

What happens next

We will confirm we’ve received your notice by either:

• email — if you’ve given us consent to email you
• post — if you’ve not given email consent

Who cannot apply

You may not be able to apply to be a REIT depending on the type of business you are, or the type of activity you make money from.

Excluded businesses

Businesses that are not property rental businesses for REIT purposes and cannot apply include:

• incidental letting of property held in connection with a trade in property
• letting of temporarily surplus accommodation
• structured finance arrangements
• owner-occupied property, including:
  • intra-group owner-occupation
  • ‘stapled’ company owner-occupation
  • ‘stapled’ companies

Excluded activities

Activities that exclude you from applying include:

• caravan sites
• way leaves
• siting of a pipeline for oil and gas
• mobile phone masts, satellite dishes or similar
• siting of a wind turbine
• dividends from another REIT
• interest in a limited liability partnership (LLP)

How to leave the regime

Notice may be given for withdrawal from the REIT regime. This can be given by either:

• the REIT company or group
• HMRC

There are also circumstances where you may be automatically withdrawn from the regime.

The date that withdrawal from the regime will apply from depends on how the notice to withdraw is given.

When you give notice to withdraw

If your company or group of companies wish to leave the REIT regime, you must give notice in writing by post or email. You should send this to the tax office that deals with your company or group.

You must tell us the date you wish to leave the regime, which must be a date in the future. The regime will then cease on that date.

If your business is still trading you’ll revert to Corporation Tax.

We will confirm receipt of your withdrawal notice by either:

• email — if you’ve given us consent to email you
• post — if you’ve not given email consent

When HMRC gives notice to withdraw

HMRC may withdraw you from the regime if you fail to meet certain conditions required to remain within the regime, or if you attempt to use the regime to obtain a tax advantage.

Read more technical information about the conditions required to remain in the regime.

We will tell you why we have withdrawn you from the regime.

The regime will stop on the date at the end of the accounting period before the one in which the event that triggered the issue of the notice.

Automatic withdrawal

You will automatically be withdrawn from the regime if you cease to be UK resident for tax purposes or become an open-ended investment company.

You will also automatically be withdrawn from the regime if any of the following apply:

• the company or principal REIT company no longer meets the requirements of Condition C regarding the shares, unless this is because the REIT company or the principal company of the group REIT becomes a member of another group REIT
• you issue a new class of ordinary shares or any other type of share apart from non-voting restricted preference shares
• you borrow on terms that entitle the lender to a share of the profits or otherwise breach the rules of section 528(8) CTA 2010

The regime will cease to apply from the end of the accounting period before the breach occurs. There are specific exemptions that may apply on demerger, both on the disposal of an asset and a company leaving the group REIT.

After the 3 year period from receiving REIT status, you must not be a close company. You will not be considered a close company if you are only a close company because you have a participator as an institutional investor, as defined under section 528 (4A) CTA 2010.

If you breach this condition, the regime will cease to apply from whichever comes later out of either:

• the end of the 3 year period from receiving REIT status
• the end of the accounting period before the breach occurred

How to appeal against a decision

You must appeal in writing within 30 days from the date we issue the notice.

Appeals will be dealt with by the First-tier Tribunal.

Email your appeal to reit.lb@hmrc.gov.uk, or post it to:

Further information

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