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HMRC internal manual

Business Income Manual

Specific deductions: rent and rates: rent charges

The Rent charges Act 1977 prohibits (with minor exceptions) the creation of further rent charges in England and Wales after
21 August 1977. Existing rent charges will be extinguished at the end of 60 years unless the payer chooses to redeem the rent charge by making a payment to the rent owner before that date. The Act does not apply to settled land.

A rent charge (sometimes called a chief rent) is defined in Section 1 as an annual or periodic sum charged on or issuing out of land.
It does not include either:

  • rent reserved by a lease or tenancy (e.g. ground rent under a long lease); or
  • interest (e.g. payable on a mortgage of land).

A rent charge is normally regarded as a deductible expense in computing trading profits.

Redemption payments are considered to be capital payments to free the land from a detriment. Unless the land is stock in trade of a dealer in land, no deduction should be given in arriving at trading profits or income from property.

As regards the treatment for Capital Gains purposes, see CG14507 and CG15292.