IFM22106 - Real Estate Investment Trust : Conditions and Tests: maximum shareholding: ‘holder of excessive rights’ (HoER) examples
Source: gov.uk (2025-04-17)


The definition of ‘holder of excessive rights’ is set out in CTA2010/S553. (see IFM22105 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22105)). Some examples are set out below. In them, C is a UK-REIT. In these examples, it is assumed that voting rights follow share ownership (so 1 share = 1 vote).

Identifying a HoER

1. Company A uses nominee N to hold its 20% shareholding in C. As nominee, N is registered as holder of the shares (which it holds on bare trust) and has no rights in relation to exercise of voting rights. C pays the dividend to N but N is required to pay that over to A. The person (directly) beneficially entitled to the dividend and to the shares in C is A, and A is also the person that controls (directly) the voting rights given by those shares given the nature of the nominee arrangement. N has no beneficial rights and so is effectively looked through. A, not N, is identified as a HoER.

2. Company B holds 100% of the shares in company A, which in turn holds 20% of shares in C. A has direct beneficial entitlement to dividends from, and the shares in, C and also has direct control of the voting rights given by those shares. A is therefore a HoER, B does not have beneficial entitlement (directly or indirectly) to C’s distributions or share capital. However, B controls indirectly more than 10% of C’s voting rights given it controls A. B is also therefore a HoER. However, if company B held only 49% of the shares in A, B would not control indirectly 10% or more of the voting rights in C so B would not be a HoER.

3. Company A owns 8% of the shares in C, and A also owns 100% of the shares in company B. B owns 4% of the shares in C. A is directly beneficially entitled to 8% of the shares in, and distributions of C, and also controls 8% of the votes in C directly. As A controls B, it indirectly controls the 4% voting rights in C held by B. A therefore controls, directly and indirectly, 12% of the voting rights in C and is a HoER. Note that B is not a HoER as it is beneficially entitled to less than 10% of the dividends of, and shares in C, and only controls (directly) 4% of the votes in C.

4. Company A owns 9% of the shares in C and A also owns 30% of Company B. B owns 4% of the shares in C. A is directly beneficially entitled to 9% of the shares in, and distributions of C, and also controls 9% of the votes in C directly. But because A is a minority shareholder in B, A is unlikely to be able to direct how B exercises its votes in respect of C. Therefore, A would not be regarded as indirectly holding the voting rights held by B. A is not a HoER.

5. Company A holds 50% of the shares in C. A fragments its holding into 6 special purpose vehicles (SPVs), which are companies, each holding less than 10% of the shares. Each SPV is directly beneficially entitled to less than 10% of the shares in, and dividends of C, and directly controls less than 10% the votes in C and so cannot be a HoER. A is not beneficially entitled to the shares in C held by each SPV. However, as A controls each SPV, it indirectly controls 50% of the voting rights in C and is a HoER.

Excluded holders

6. Company A is a UK-resident company that holds 50% of the shares in C. As a UK-resident company, A receives gross payment of PID in accordance with Regulation 7 of the Real Estate Investment Trusts (Assessment and Recovery of Tax) Regulations 2006. As it holds 50% of the shares, A is a HoER. However, due to its entitlement to receive PIDs gross, A is an excluded holder (CTA2010/S553(4A)) so a HoER charge will not arise in relation to PID distributions to A.

7. Company A is a non-UK resident company that holds 50% of the shares in C. The relevant double taxation agreement states that, regardless of the size of the holding in a REIT, the shareholder should be taxed at 15% on any PID payments. As it holds 50% of the shares, A is a HoER. However, A is an excluded holder as the reason it will be taxed at the specified treaty rate is not solely due to the size of the interest in the REIT (PIDs would still be taxed at 15% even if A held only 5% of the shares in C). The HoER charge will not arise in relation to PID distributions to A.