Corporation Tax Act 2010 section 566

Breach of condition B in section 531 in accounting period 1

Section 566 deals with what happens when a UK REIT fails to meet the balance of business assets test during its first accounting period as a REIT, and provides that the breach may be ignored in certain circumstances.

• Condition B requires that a sufficient proportion of a UK REIT's total assets must be involved in its property rental business.
• If this condition is not met during the REIT's first accounting period (accounting period 1) but is met at the beginning of the next accounting period, the breach is ignored.
• Although the breach is ignored for the purposes of continuing REIT status, a separately calculated amount under section 567 is charged to corporation tax at the main rate, treated as if it were profits of the residual (non-property rental) business.
• This concession is subject to an overriding power under section 572, which allows an HMRC officer to issue a notice terminating the UK REIT regime in certain circumstances.