Where a company or principal company of a group REIT leaves the regime voluntarily by giving notice under CTA2010/S571 and was in the regime for less than ten years, a special rule applies to the disposal of property rental business assets’ that take place within the ‘post-cessation period’ (CTA2010/S581).
The rule is that tax payable on the disposal will be determined without taking account of any deemed disposals on entry to or exit from the regime, or on movements out of the property rental business.
The asset will therefore not benefit from rebasing to market value at entry to the regime, and the computation of any profits or gain on disposal will use the original cost of the asset to the company. Neither is there to be a refund of any Entry Charge paid (see IFM23025) and attributable to that property.
For this purpose, a ‘property rental business asset’ is one that was exploited to produce rental income for the property rental business. The ‘post cessation period’ is the two years following the date of exit from the regime.
Group REITs
For Group REITs, the consequences of leaving early apply when the principal company of the group gives notice for the group as a whole to leave the regime within ten years of joining or where an exiting company has been a member of the Group REIT for less than ten years.
Joint Ventures
The rules for disposals of property rental business assets following early exit apply equally to joint venture companies (CTA2010/S589). The date specified in the election under CTA2010/S586 (for joint venture companies) or S587 (for joint venture groups) is the date of entry into the REIT regime for the purpose of determining whether there is an early exit. When a Joint venture notice under CTA2010/S586 or S587 ceases to apply the provisions of CTA2010/Part 12 cease to apply to the Joint Venture Company or group. However the early exit provisions continue to apply (CTA2010/S590(6))
