IFM22025 - Real Estate Investment Trust : Conditions And Tests: The Property Rental Business Condition: Condition A: CTA2010/S529(1)
Source: gov.uk (2025-04-17)


To join and remain in the regime, a UK-REIT is required to meet the property rental business condition (IFM22020 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22020)). Both conditions A and B, or alternatively, from 11 July 2023, condition C, must be met throughout the accounting period of the company or group.

Three or more properties

Property rental business condition A is that the property rental business involves at least three separate rental properties. To satisfy condition A, the three-property requirement must be met throughout each accounting period. Failure to meet it does not result in automatic expulsion from the regime. However, serious (CTA2010/S574) or repeated (CTA2010/S575) breaches of Condition A may result in expulsion (see IFM27030 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm27030)).

For a Group REIT, the property rental businesses of all the members of the group are treated as being a single business (CTA2010/S529(3)). Property rental business condition A applies to that single business.

Definitions

The definitions of 'property', 'involved' and 'single property' are in CTA2010/S529(4).

A 'property' is 'involved' in the business if it is an estate or interest in land that is exploited in generating income for that property rental business. This reflects the definition of property business in section CTA2009/S205.

Since the business concerned is the property rental business as defined in CTA2010/S519, the exclusions listed in CTA2010/S604 and S605 will also apply to this test. This means for instance that part of a field rented out for a mobile phone mast would not count as a property involved in the property rental business for this condition.

For UK resident members of group REITs, the property rental business includes both UK and overseas property business apart from any types of income or business listed as excluded in CTA2010/S604 and S605. For non-resident members of the group, it includes the same kind of business i.e. the company’s UK and overseas property business, were the subsidiary UK resident (CTA2010/S519(4), subject to the same CTA2010/S604 and S605 exclusions).

Note that the term ‘property rental business’ as used for these conditions is not the same as the property rental business that gives rise to tax-exempt profits as the overseas property business of non-resident members of the group are included for these conditions.

'Single property' is any unit that is designed, fitted or equipped for separate rental and is rented or available for rent separate from any other unit. This means that, for example, each shop within a shopping complex would count as one property.

For more detail on how the definition of property applies, see IFM22030 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22030).

Indirectly held property

For the extent to which property not held directly by a member of the REIT group can count for satisfying the property tests of the property rental business conditions see IFM22033 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22033).