Corporation Tax Act 2010 section 538

Entry charge

Section 538 imposes a tax charge on companies when they enter the UK Real Estate Investment Trust (REIT) regime, based on a notional amount of income calculated by reference to the market value of their property rental assets.

• When a company enters the UK REIT regime, it is treated as having a notional amount of income that is subject to tax — this is effectively an entry charge.
• The notional income is treated as arising in the company's residual business (i.e. its non-property rental activities), ensuring that it falls within the charge to tax rather than being sheltered by the tax-exempt property rental business.
• UK companies, including UK joint venture companies, pay the entry charge at the corporation tax rate, and in practice the charge amounts to 2% of the market value of assets involved in the UK property rental business.
• Non-UK companies, including non-UK joint venture companies, are instead charged to income tax on the notional amount at the basic rate of income tax.