Corporation Tax Act 2010 section 577

Notice under section 572: multiple breaches of conditions in Chapter 2

Section 577 sets out the circumstances in which HMRC may terminate a company's UK REIT status where there have been multiple breaches of the key REIT conditions over a ten-year period.

• HMRC may issue a termination notice where at least two different REIT conditions (from different sections) have been breached within a rolling ten-year window, and the REIT has relied on breach-tolerance provisions more than four times in that period.
• The ten-year period starts from the date the first condition was breached; where the first breach relates to the balance of business profits test, it is treated as occurring on the last day of the relevant accounting period.
• Certain breaches are disregarded, including those arising from group restructurings (such as a REIT joining another REIT group), breaches during the first accounting period relating to balance of business tests, and breaches covered by specific demerger or transitional provisions.
• A breach of the close company condition during the first three years of REIT status is also ignored for these purposes.