This week we look at the application of the CIR rules to real estate investment trusts.
This is the twenty sixth in our series of articles looking at some of the detail of the new corporate interest restriction (CIR) rules. The CIR legislation was included in Finance (No.2) Bill 2017, published on 8 September, with the start date continuing to be 1 April 2017. We stay with the theme of CIR and real estate this week, with a look at the special considerations for a UK resident property company or group that qualifies as a UK real estate investment trust (REIT). Where a qualifying property company or group has elected to be a REIT, income profits and capital gains of the qualifying property rental business are exempt from corporation tax. Notwithstanding the fact that the property rental income is tax exempt, a REIT is still required to apply the CIR rules.
Key aspects of the UK REIT tax regime
The key aspects of the REIT regime are as follows:
CIR rules amended for UK REITs
If interest is disallowed under the CIR rules, there is a series of steps to allocate this between the PRB and any residual business carried on by the REIT. There is some flexibility in this allocation which can impact the distributions to be made from the PRB.
The normal CIR rules are amended for REITs as follows:
The previous articles in this series can be found here.
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