Corporation Tax Act 2010 section 568

Breach of balance of business conditions after accounting period 1

Section 568 provides a degree of tolerance for UK REITs that narrowly fail the balance of business conditions on profits and assets in accounting periods after their first period.

• A UK REIT must normally meet balance of business conditions requiring at least 75% of profits from property rental business and at least 75% of assets involved in property rental business.
• If the profits condition is breached in any accounting period after the first, but property rental profits still represent at least 50% of total profits, the breach is ignored.
• If the assets condition is breached in any accounting period after the first, but property rental assets still represent at least 50% of total asset value, the breach is ignored.
• This tolerance does not prevent HMRC from issuing a notice terminating a company's UK REIT status under section 572 if the circumstances warrant it.