IFM22075 - Real Estate Investment Trust : conditions and tests: balance of business conditions: condition B (CTA2010/S531(5)-(9))
Source: gov.uk (2025-04-17)


Condition B relates to the assets of the company or group. At the start of each accounting period, at least 75% of the total value of assets of the company or group must relate to the property rental business, or be cash or shares held in other UK REITs (CTA 2010/S531(5)). In some cases, a REIT can fail this test but remain in the regime – see IFM27005 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm27005).

For company REIT purposes the classification of “assets relating to the property rental business” means those separate items that would be classified as assets for accountancy purposes if separate financial accounts were produced for the property rental business, not solely assets that produce rent.

For Group REITs the assets are those included in the financial statement under CTA 2010/S532(2)(a). Note that the definition of property rental business for this purpose is not restricted to the property rental business that is exempt from tax as a result of the application of the UK-REIT legislation, it includes the worldwide property rental business (see IFM21020 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm21020)).

The total value of the group's assets is the sum of the asset value shown in the financial statements under CTA2010/S532(2)(a) and (c) for the relevant accounting period.

For both companies and groups, the assets to be considered exclude, as specified under CTA2010/S531(7A):
- assets held solely in connection with changes in the fair value of hedging derivative contracts (as defined in CTA2010/S599(4)),
- assets held solely in connection with items which are outside the ordinary course of the company’s or group’s business (irrespective of treatment in the accounts), having regard to the company or group’s past transactions both before and following election into the REIT regime (see IFM22072 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22072)), and
- for accounting periods beginning on or after 1 April 2022, assets of residual business held solely as a result of compliance with planning obligations entered into in accordance with section 106 of the Town and Country Planning Act 1990 in the course of the property rental business of the company or group (see IFM22073 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22073)).
Valuation of assets

The assets are valued using IAS, but no account is taken of liabilities secured either generally or specifically against any of the assets. If IAS offers a choice between cost basis and fair value, fair value must be used.

See IFM22040 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22040) for more detail.

Property under development

A REIT may acquire land or property and spend time developing it. Provided the intention is for the building to be retained as an investment property, the value of the land/ property is included in the assets of the property rental business even though no rental income has been generated by the property during the development period.

Void periods

Even though a property may be generating no rental income for a period, it will still count as an asset of the property rental business provided the intention is to retain it as an investment property and let it again.

Group REITs - Intra-group balances

Intra-group balances and holdings are ignored to the extent they are referable to the REIT’s interest in the relevant REIT group member. The amount that is not ignored is the percentage represented by the beneficial interest in the subsidiary that is owned by non-group members. Beneficial entitlement is measured by reference to the beneficial entitlement to profits available for distribution to shareholders.

Entities that are not members of the ‘group’

Members of the group (i.e. 75%/ effective 51% subsidiaries of the principal company) may have interests in other entities. The treatment of the group members’ interests in these other entities (and, where appropriate, their underlying assets) flows from how the interests are dealt with in the financial statements for the property rental business under CTA2010/S532(2)(a) and the residual under CTA2010/S532(2)(c) (see IFM22340 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22340)).

Condition B not met on joining the REIT regime

If a notice is given specifying a date from which CTA2010/Part 12 is to apply, and the balance of business asset test is not met at the beginning of the accounting period that starts on that date, then the REIT can stay in the regime provided that the condition is met at the start of the following accounting period (CTA2010/S566). This breach will not be taken into account when considering multiple breaches of REIT tests and conditions see IFM27060 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm27060).