Revenue Note for Guidance

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Revenue Note for Guidance

705L Transfer of assets

Summary

This section provides for the capital gains tax treatment of assets transferred from a company or group when it elects to be a REIT or group REIT.

Details

(1) Where a company becomes a REIT, its assets are deemed to have been disposed of by the company immediately before it becomes a REIT and reacquired by the REIT immediately on becoming a REIT, for a consideration equal to the market value of the assets on the date specified in the notice given under section 705E(3)(a).

(2) Where a group of companies becomes a group REIT, the assets of each member of the group are deemed to have been disposed of by that member immediately before the group becomes a group REIT and reacquired by that member immediately on becoming a group REIT, for a consideration equal to the market value of the assets on the date specified in the notice given under section 705E(3)(a).

(3) Where a REIT or group REIT ceases to use an asset for the purposes of its property rental business and begins to use it for the purposes of its residual business, the asset is deemed to have been disposed of by the REIT or relevant member of the group REIT for the property rental business and acquired by the REIT or relevant member of the group REIT for the residual business, on the date it ceases to be used for the property rental business.

(4) The deemed sale and acquisition is treated as being for a consideration equal to the market value at the date referred to in subsection (3). Notwithstanding section 705G, any gain accruing to the property rental business will be a chargeable gain for the purposes of the Capital Gains Tax Acts.

(5) Where a REIT or group REIT ceases to use an asset for the purposes of its residual business and begins to use it for the purposes of its property rental business, the asset is deemed to have been disposed of by the REIT or relevant member or members of the group REIT for the residual business and acquired by the REIT or relevant member or members of the group REIT for the property rental business, at the date on which it ceases to be used for the residual business and for a consideration equal to the market value of the asset.

Relevant Date: Finance Act 2019