Section 556 — Corporation Tax Act 2010: Disposal of assets

Disposal of assets 556 1 Subsection (2) applies if—

a an asset has been used wholly and exclusively for the purposes of property rental business of a company which is, or is a member of, a UK REIT, ... b the asset is disposed of in the course of trade for the purposes of residual business of the company , and c if the company is a member of a UK REIT, the disposal is not to another member of the UK REIT.

2 If this subsection applies—

a the deemed sale and reacquisition under section 536(2) is to be ignored, and b the asset is to be treated as having been disposed of in the course of the company's residual business.

3 Subsection (2) is to be taken to apply in particular if—

a a property acquired by a company which is, or is a member of, a UK REIT has been developed since acquisition, b the cost of the development exceeds 30% of the ... value of the property ... , c the company disposes of the property within the period of 3 years beginning with the completion of the development , and d if the company is a member of a UK REIT, the disposal is not to another member of the UK REIT. 3ZA For the purposes of subsection (3)(b) the value of a property is to be treated as its fair value (determined in accordance with international accounting standards) at whichever of the following times that value is the greatest—

a on entry;

b when the property was acquired;

c the beginning of the accounting period in which the development commenced. 3A Subsection (3B) applies in the case of a company (“C”) which is, or is a member of, a UK REIT if—

a one or more properties acquired (directly or indirectly) by a relevant UK property rich company have been developed since acquisition, b the cost of the development exceeds 30% of the ... value of the property ..., c C disposes of any of its rights or interests in the relevant UK property rich company, d the disposal is made within the period of 3 years beginning with the completion of the development, and e if C is a member of a UK REIT, the disposal is not to another member of the UK REIT. 3AA For the purposes of subsection (3A)(b) the value of a property is to be treated as its fair value (determined in accordance with international accounting standards) at whichever of the following times that value is the greatest—

a on entry;

b when the property was acquired;

c the beginning of the accounting period in which the development commenced. 3B If this subsection applies, section 535A is not to apply in relation to so much of the amount of a gain accruing on the disposal as relates to the property which has been developed. 3C For the purposes of subsection (3A)—

a a company is a “relevant UK property rich company” if, as a result of section 535A, any part of a gain accruing to C on a disposal of a right or interest in the company would not be a chargeable gain, and b a relevant UK property rich company acquires property “indirectly” if property is acquired by someone other than the relevant UK property rich company and the property is taken into account in determining the value of the assets of the relevant UK property rich company. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 If a percentage of the gains of property rental business of a member of a group UK REIT is excluded from a financial statement in accordance with section 533(3), that percentage of those gains is to be treated for corporation tax purposes as gains of the member's residual business.

6 This section has effect in relation to a non-UK member of a group UK REIT as if references to property rental business were references to UK property rental business.

7 Sections 535 , 535A and 535B are relevant to the tax treatment of any gain arising to a company under this section.