BECOMING A UK-REIT 24
If HMRC considers that a breach of the property rental business conditions, the distribution condition, or the balance of business conditions is sufficiently serious, it may give notice to the UK-REIT that it will be removed from the regime. There is a right of appeal to the Tax Tribunal against the issue of such a termination notice. Newly established UK-REITs may breach a number of conditions without penalty provided they are subsequently satisfied within a certain period including: X The ‘75% assets’ test, provided it is satisfied by the end of the first accounting period of the UK-REIT X The close company condition, provided it is met within three years of entry into the UK-REIT regime.
MINOR OR INADVERTENT BREACHES OF CONDITIONS Minor or inadvertent breaches of certain conditions will not automatically result in the UK-REIT ceasing to be within the regime. As noted in Appendix C, breaching certain conditions simply results in a tax charge being levied on the UK-REIT. For breaches of the majority of the other conditions there will be no loss of UK‑REIT status, provided the breach is quickly remedied. There is, however, a limit on how often each individual condition may be breached. If that limit is exceeded within a ten year period, the regime will no longer apply. The number of breaches allowed depends on the condition being breached. A summary of the position is set out in Appendix C.
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