Section 543 — Corporation Tax Act 2010: Profit: financing-cost ratio

Profit: financing-cost ratio 543 1 This section applies to a UK REIT if the result of the calculation in subsection (2) is less than 1.25 for an accounting period (unless it is nil or a negative amount) .

2 The calculation is— P P P F C where— PP is the UK REIT's property profits for the accounting period (see section 544(1)), and PFC is the UK REIT's property financing costs for the accounting period (see section 544(3)).

3 The excess is charged to corporation tax in relation to the accounting period under the charge to corporation tax on income. 3A “ The excess ” means—

a the amount equal to—

i PFC, minus ii the property financing costs which would cause the calculation in subsection (2) to equal 1.25 for the accounting period, or b if less, the amount equal to 20% of PP.

4 The excess is treated as profits of residual business—

a in the case of a group UK REIT, of the principal company of the group, and b in the case of a company UK REIT, of the company.

5 Accordingly, it is charged to corporation tax at the main rate of corporation tax. 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 No loss, deficit, expense or allowance may be set off against the excess.

7 The Commissioners for Her Majesty's Revenue and Customs may waive a charge to corporation tax under this section in respect of an accounting period if they think that—

a the company was in severe financial difficulties at a time in the accounting period, b the result of the calculation in subsection (2) is less than 1.25 in respect of the accounting period because of circumstances that arose unexpectedly, and c in those circumstances the company could not reasonably have taken action to avoid the result being less than 1.25.

8 The Treasury may make regulations which specify criteria to be applied by the Commissioners in determining whether to waive a charge under subsection (7).