705IA Disposals and reinvestments.

(1) This section applies where a REIT or group REIT disposes of a property of its property rental business.

(2) In this section—

(a) subject to paragraph (b), “net proceeds” , in relation to the disposal of the property of the property rental business, means the full proceeds from such disposal as reduced by any amount used to repay, in whole or in part, specified debt to the extent that the specified debt being repaid was employed in the acquisition, enhancement or development of the property being disposed of;

(b) where the reference to the expression “net proceeds” (in relation to such disposal) occurs for the purposes of subsection (3)(ii), that reference shall be deemed to be a reference to an amount that is equal to the net proceeds (in relation to such disposal) as that expression is to be construed by virtue of paragraph (a).

(3) Where the net proceeds from the disposal of the property are not—

(a) invested in the acquisition of a new property for use in the REIT’s or group REIT’s property rental business,

(b) invested in the development or enhancement of a property held for use in the REIT’s or group REIT’s property rental business, or

(c) distributed to the shareholders of the REIT or the shareholders of the principal company of the group REIT, as the case may be,

before—

(i) the expiry of the period referred to in section 705I(2) (in this subsection referred to as the “first mentioned period” ) or, if earlier than that expiry, the date specified in a notice given under subsection (1) or (4) of section 705O (in this subsection referred to as the “specified date” ), or

and

(ii) for the purposes of satisfying the condition specified in paragraph (a) or (b), the expiry of the period of 12 months beginning prior to the date of disposal of the property,

then any amount not so invested or distributed shall, for the purposes of applying the condition specified in section 705B(1)(b)(vi) and for the purposes of section 705N(a), be treated as property income of the REIT or group REIT arising in the accounting period in which the first mentioned period expires or the specified date falls.

(4) Subsections (2) and (3) of section 172D, and subsection (4) of section 153, shall not apply to any distribution of the proceeds of a disposal referred to in subsection (1).