IFM22303 - Real Estate Investment Trust: group conditions and rules: financial statements: group members
Source: gov.uk (2025-04-17)


To determine compliance with the Balance of business conditions, the principal company of a group REIT must prepare financial statements for the group’s property rental business and residual business for each accounting period (see IFM22300 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22300)). The statements used for the Balance of business condition are the statement of property rental business (CTA2010/S532(2)(a)) and the statement of residual business (CTA2010/S532(2)(c)).

For accounting periods beginning before 1 April 2022, these group statements were required to specify particular matters in relation to each member of the group.

For accounting periods beginning on or after 1 April 2022, the requirement for financial statements (a) and (c) was simplified meaning that not all REIT groups now have to specify the particular items in relation to each member of the group within them. This change means that where a group clearly exceeds the Balance of business threshold, they do not have to specify the particular items in relation to each member of the group simply to confirm this. This means the financial statements only need to specify the particular items for the group as a whole: CTA2010/S533(1).

Where the group statements show that the profits of the property rental business are 80% or more of the aggregate profits (the sum of the profits of the property rental business and the profits of the residual business: see IFM22070 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22070)), it is assumed that the group meets Balance of business condition A (CTA2010/S533(1E)).

Where the group statements show that, at the beginning of the accounting period, the value of the property rental business assets is 80% or more than the sum of the value of the property rental business assets and the residual business assets, it is assumed that the group meets Balance of business condition B (CTA2010/S533(1I)).

If one or both of these conditions are not assumed to have been met in this way, the principal company must additionally specify the matters required by these statements in relation to each member of the group (CTA2010/S533(1C) and CTA2010/S533(1G)).

Property rental business profits less than 80% of aggregate profits

Where the financial statements for the group prepared under CTA2010/S532(2) show that profits of the group’s property rental business are less than 80% of the sum of the group’s property rental business profits and residual business profits, the financial statements must specify, for each group member, as well as for the group overall, the matters outlined at CTA2010/S533(1)(a)-(ca) in order to confirm that the Balance of business condition A has been met.

Value of Property rental business assets less than 80% of total value of group assets

Where, at the beginning of the accounting period for which the financial statements were prepared, the sum of the value of property rental business assets considered for Condition B is less than 80% of the total value of assets held by the group, the financial statements must specify, for each group member as well as for the group overall, the matters outlined at CTA2010/S533(1)(d).

Applying the 80% tests for profits and assets

Profits, for the purposes of the 80% test, are profits before tax, calculated in accordance with international accounting standards taking into account the items excluded in accordance with CTA2010/S531(4)(b) to (d). Any expenses relating to both the property rental business and the residual business are to be apportioned on a just and reasonable basis (see IFM22070 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22070)).

Assets, for the purposes of the 80% test, is the sum of the value of assets relating to the property rental business and assets relating to the residual business which consist of cash or relevant UK REITs shares, taking into account the items excluded in accordance with CTA2010/S531(7A) (see IFM22075 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22075)).