705K Taxation of certain shareholders

Summary

This section provides for the taxation of a shareholder who meets the definition of “holder of excessive rights”.

Details

(1) A “holder of excessive rights” is a person who is entitled, directly or indirectly, to at least 10 per cent of the property income dividend distribution, or who is entitled to or controls directly or indirectly, at least 10 per cent of the share capital of or voting rights in the REIT or in the principal company of a group REIT. A qualifying investor (i.e. an investment undertaking within the meaning of section 739B(1), a pension scheme, a life assurance company, a charity or NAMA) is not regarded as a holder of excessive rights.

(2) & (3) Where a person becomes a holder of excessive rights merely because the company converts to a REIT or converts to the principal company of a group REIT, then the provisions of subsection (3) will not apply for a period of three years from the date it becomes a REIT. This is to give the REIT time to dilute the shareholding to below 10%.

Where a REIT or group REIT makes a distribution to a holder of excessive rights, the distribution will be treated as an amount of income in the hands of the REIT or the principal company of a group REIT.

(4) The distribution will be chargeable to corporation tax under Case IV of Schedule D and regarded as income arising in the period in which the distribution is made without the set off of any loss, deficit, expense or allowance.

Relevant Date: Finance Act 2021