Corporation Tax Act 2010 section 557

Movement of assets into ring fence

Section 557 deals with the tax consequences when an asset moves from a UK REIT's residual (non-property rental) business into its ring-fenced property rental business.

• When an asset previously used solely in a UK REIT's residual business begins to be used solely for property rental business, it is treated as disposed of and immediately reacquired at market value, triggering a deemed disposal for tax purposes.
• For capital allowances purposes, the deemed disposal and reacquisition does not give rise to any allowances or charges, and the capital allowances history of the asset carries over seamlessly from the residual business to the property rental business at the existing tax written-down value.
• If a percentage of property rental business gains is excluded from a group UK REIT's financial statements because those gains are attributable to a non-member, that excluded percentage is treated as gains of the member's residual business and taxed accordingly.
• For non-UK members of a group UK REIT, the rules apply by reference to UK property rental business rather than property rental business generally, and any gain arising under this section that is subject to corporation tax is charged at the main rate.

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