IFM22010 - Real Estate Investment Trust : Conditions And Tests: Company Conditions: Conditions A-C: CTA2010/S528(1) - (3)
Source: gov.uk (2025-04-17)


The conditions for joining the REIT regime are set out in CTA2010/S528.

Company Conditions A and B are the conditions the company/ principal company must meet before giving notice that it wants to join the regime. They are set out in CTA2010/S528(1) and (2). Failure to meet either of these conditions prevents a company or group from joining the regime. The conditions must be met at all times the company or group is in the regime, and failure to meet Conditions A and B results in a company/group leaving the regime automatically from the end of the previous accounting period (CTA2010/S578).

The company/ principal company does not have to meet Company Condition C before giving notice to join the regime, as set out in CTA2010/S525.

A company that does not meet Condition C is therefore still able to join the regime. However, the company/principal company must satisfy Condition C for at least part of the first day and the remainder of the accounting period specified in the Notice under either CTA2010/S523 or S524 (see IFM23010 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm23010)).

Company Condition A - UK resident

This condition is that the company/ principal company is a company resident in the UK and is not resident in another state for tax purposes.

For purposes of the UK-REIT legislation, 'company' takes the TCGA1992/S170(9) meaning (see CG45105 (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg45105)) which includes bodies incorporated under an act of law, such as the Companies Act 2006. Although that definition includes industrial and provident and friendly societies, other conditions of the regime mean they cannot be UK-REITs.

'UK resident' takes its normal tax meaning as set out in CTA2009/S14 (INTM120030 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm120030)). As well as being resident in the UK under UK tax law, a company may be treated as resident of another state according to their laws. Such a 'dual resident' company would not meet Company Condition A unless there is a Double Taxation Agreement (DTA) in place between the UK and the other state, the DTA has a tie-break clause, and in line with the tie-break clause it is agreed that residence is in the UK (see INTM120070 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm120070)).

Note that some DTAs do not have tie-break clauses. This would mean that a company that was for instance, incorporated in Country X (and thus Country X resident for Country X tax purposes) but had its management and control in London (and thus UK-resident for UK tax purposes) would fail Company Condition A.

Conversely a company incorporated in a country where there is a tie-break clause may meet Condition A as incorporation in that country does not necessarily mean that the company is tax resident in that country.

Guidance on company residence can be found in the International manual at INTM120000 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm120000) onwards.

Company Condition B - closed-ended

This condition is that the company is not an open-ended investment company (OEIC) within FSMA2000/S236.

It follows that any vehicle with variable capital set up within or outside the UK cannot be a UK-REIT.

Company Condition C - shares admitted to trading on a recognised stock exchange or, 70% of the ordinary share capital is held by one or more institutional investors

This condition requires that either:
- the shares forming the ordinary share capital of the company/principal company are admitted to trading on a recognised stock exchange (CTA2010/S528(3)(a))
or,
- for accounting periods that begin on or after 1 April 2022, at least 70% of the shares forming the ordinary share capital of the company/principal company are owned by one or more institutional investors (CTA2010/S528(3)(b)).
Applying CTA2010/S528(3)(a), the definition of 'recognised stock exchange' is at ITA07/S1005 and a list of the exchanges that have been recognised by HMRC can be found at Gov.uk link (https://www.gov.uk/government/publications/recognised-stock-exchanges-definition-legislation-and-tables/recognised-stock-exchanges-definition-legislation-and-tables-of-recognised-exchanges) . At the time a company or group becomes a UK REIT by giving notice, the company/principal company is required to confirm either that this condition is reasonably expected to be met throughout the accounting period commencing upon entry into the regime (accounting period 1) (CTA2010/S525((1)(c)) or that they expect to meet this condition for at least part of day one (the first day of accounting period 1) and throughout the remainder of accounting period 1 (CTA2010/S525((4)(b)). The UK REIT must also meet the further condition relating to shares (see below).

If CTA2010/S528(3)(b) ceases to be met, for example due to a change in ownership, meaning that now less than 70% of the ordinary share capital is owned by one or more institutional investors, then CTA2010/S528(3B) will apply. This provides for a 12-month grace period, starting on the day that CTA2010/S528(3)(b) ceases to be met. During this grace period, Condition C will be treated as if it continued to be met. This allows time for the ownership of ordinary share capital by institutional investors to be returned to at least 70%, or for the shares to be admitted to trading on a recognised stock exchange in accordance with CTA2010/S528(3)(a).

The 12-month grace period only applies when CTA2010/S528(3)(b) ceases to be met. It does not apply when a company/principal company initially joins the regime. Condition C will still be expected to be met for at least part of day one of accounting period 1.

IFM22012 (https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm22012) provides further information about meeting condition C through ownership of the ordinary share capital by institutional investors.

Further condition relating to shares

Where Condition C is satisfied by the ordinary share capital of a company/principal company being admitted to trading on a recognised stock exchange, then to remain within the regime a further condition relating to those shares must be met in relation to each accounting period. This is that the ordinary share capital which is admitted to trading is either also “listed” on a recognised stock exchange throughout the accounting period, or “traded on a recognised stock exchange” during the accounting period (CTA2010/S528A).

CTA2010/S1137(2) confirms that “listed” refers to shares that are admitted to a recognised stock exchange and are either included in the official UK list or are officially listed in a qualifying country outside the UK.

To be “traded on a stock exchange” means that at least one share in the company/principal company must have changed hands on the exchange during the accounting period.

However, the requirements for this further condition are treated as met in the first 3 accounting periods provided they are met on or before the last day of the 3rd accounting period of the company/principal company. This relaxation is set out in CTA2010/S528B.

Example 1

A company or group not owned at least 70% by institutional investors intends to elect to become a REIT. At that stage, the company does not meet the conditions to be treated as “listed”. To meet Condition C the shares must be admitted to trading on a recognised stock exchange for at least part of day one of its first accounting period as a REIT onwards. Once admitted to trading, the relaxation of the further condition allows the REIT until the last day of its third accounting period to meet the requirement that either the shares are “listed” or they are “traded” on a recognised stock exchange. The further condition must then be met in each subsequent accounting period.

Example 2

If in the above example, the company is already “listed” on a recognised stock exchange when it elects to be a REIT, or it is able to “list” on day one of being a REIT, it will meet both Condition C and the further condition from day one so long as it remains “listed”.

HMRC recognise that in certain cases markets use terms such as ‘listed’, ‘admitted to trading’, or ‘quoted’ interchangeably. Please refer to Tables 1 and Table 2 in HMRC’s guidance on Recognised stock exchanges available here (https://www.gov.uk/government/publications/recognised-stock-exchanges-definition-legislation-and-tables/recognised-stock-exchanges-definition-legislation-and-tables-of-recognised-exchanges) to check whether shares admitted to a particular market would meet the ‘listed” condition.CTA2010/S527(3A) describes where subsections CTA2010/S528A and therefore CTA2010/S528B do not apply. This is where condition C is met by CTA2010/S528(3)(b), the 70% ownership of the ordinary share capital by institutional investors rule.