Taxes Consolidation Act 1997 section 705I

Funds awaiting reinvestment

Section 705I sets out how the proceeds from a disposal of rental property, or from a share issue, by a REIT or group REIT are treated where those proceeds are held pending reinvestment.

• Where a REIT or group REIT sells a property from its property rental business, or raises cash through the issue of ordinary shares, and the proceeds are held rather than immediately reinvested, special rules apply to any profits earned on those proceeds.
• For a period of 24 months from the date of disposal or the date the shares are issued, any profits arising from investing those proceeds (other than in property for the property rental business) are treated as property profits and are therefore exempt from corporation tax.
• Once the 24-month period expires, any further profits arising from the investment of those proceeds are no longer treated as property profits and become taxable as part of the residual business in the normal way.
• If the proceeds themselves are still held after the end of the 24-month period, they are treated as assets of the residual business from that point onwards.