Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Business Income Manual

From
HM Revenue & Customs
Updated
, see all updates

Specific receipts: rents: letting surplus accommodation: rents may be treated as trading receipts

S21 Income Tax (Trading and Other Income) Act 2005, S44 Corporation Tax Act 2009

Traders can choose to include receipts and expenses from letting business accommodation which is ‘temporarily surplus to requirements’ in the computation of trade profits where all of the following conditions apply:

  1. The accommodation is not held as trading stock.
  2. The receipts are in respect of part of a building of which another part is used to carry on the trade.
  3. The rental receipts are relatively small.
  4. The receipts and expenses would otherwise be brought into account in computing the profits of a property business of the trader.

For this purpose, accommodation is ‘temporarily surplus to requirements’ only if:

  • it has been used for the purposes of the trade within the last three years (or acquired within that period);
  • it is let for a term of not more than three years; and
  • the trader intends to use it for trade purposes at a later date.

If accommodation is temporarily surplus to requirements at the beginning of a period of account, it continues to be treated as temporarily surplus to requirements until the end of that period.

Once the decision is made to include the receipts and expenses in trade profits, then this treatment must continue as long as the conditions are satisfied.

In these provisions, ‘letting’ includes a licence to occupy.