Commentary

D8.131 Tax implications

Corporate tax
Corporate tax | Commentary

D8.131 Tax implications

Corporate tax | Commentary

D8.131 Tax implications

Entry to the regime

Where the qualifying conditions (D8.132) are met, such that a company can enter the regime, the fund's pre-entry property rental business is treated as ceasing and the assets of the business are treated as sold and reacquired by the fund immediately after entry, but no chargeable capital gain is crystallised and there is no balancing allowance or charge for capital allowance purposes. The fund after entry stands in the shoes of the fund before entry for capital allowance purposes. A new corporation tax accounting period begins on entry and a new distribution period begins1.

For disposals made on or after 1 August 2012, where a fund ('the pre-conversion fund') which is not a property authorised investment fund becomes, or intends to become, a property authorised investment fund the reorganisation rules2 apply in relation to the disposal and acquisition of units in the fund, and therefore the conversion should be neutral for chargeable gains tax purposes (see D6.101–D6.103)3. This treatment applies if4:

  1.  

    (a)     the unit-holders in the pre-conversion fund dispose of their original units and, as part of an arrangement, acquire units of the same, or substantially the same, value as the original units in the fund which is, or is intended to become, the dedicated feeder fund for the property authorised investment fund

  2.  

    (b)     where a transaction involves the acquisition of units in a dedicated feeder fund, it is undertaken with the agreement of the manager of the property authorised investment fund

A fund converting

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