Corporation Tax Act 2010 section 551

Tax consequences of distribution to holder of excessive rights

Section 551 sets out the tax penalty imposed on a UK REIT that makes a distribution to a holder of excessive rights without having taken reasonable steps to prevent it.

• Where a UK REIT distributes to a holder of excessive rights (broadly, a single entity holding 10% or more) and has not taken reasonable steps to prevent this, the REIT itself is treated as receiving a deemed amount of taxable income calculated under section 552.
• This deemed income is charged to corporation tax at the main rate as if it were profits of the REIT's residual (non-property rental) business, arising in the accounting period in which the distribution was made.
• No losses, deficits, expenses or allowances of any kind may be set off against this deemed income — it is taxed in full with no relief available.
• For a group UK REIT the penalty falls on the principal company of the group; for a single-company UK REIT it falls on that company directly.