Corporation Tax Act 2010 section 558

Demergers: disposal of asset

Section 558 provides special rules that apply when a UK REIT company transfers a property rental business asset to a subsidiary, and that subsidiary subsequently joins a new group UK REIT through a demerger-type transaction.

• A UK REIT company (C) may dispose of a property rental business asset to its 75% subsidiary (S), then sell its interest in S to another company (P), which elects for group UK REIT status within six months of the asset disposal
• The normal tax consequences that arise when a group enters the UK REIT regime (deemed disposals and reacquisitions at market value) do not apply to the transferred asset or the business conducted through it
• The rules that normally impose tax charges when assets leave the property rental business ring fence also do not apply to C's disposal of the asset
• These reliefs are clawed back if, at the end of the six-month post-disposal period, P's group does not meet the required conditions regarding being a close company, stock exchange listing, and share capital structure