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HMRC internal manual

Business Income Manual

Specific deductions: rent and rates: rentcharges

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

A rentcharge (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 rentcharge 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, therefore, 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.