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HMRC internal manual

Business Income Manual

Specific deductions: rent and rates: Falkirk & Lennard cases

There may be occasions where a trader, under an obligation entered into for trade purposes, continues to pay rent for premises which are no longer exclusively used for those purposes. In this situation, the difference between the rent paid and any rent received forms an admissible deduction in computing the profits if the trader either:

  • sublets the whole or part of the premises at a loss; or
  • leaves them wholly or partly empty.

See CIR v Falkirk Iron Co Ltd [1933] 17 TC 625 and Hyett v Lennard [1940] 23 TC 346.

Although the decisions in the two cases mentioned above related to periods after the premises had ceased to be used for the purposes of the trade, the same principles are regarded as applying to periods before the premises commenced to be occupied for those purposes.

As regards the receipts of rents and payments from tenants, see also BIM41000 onwards.