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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Builders, property dealers & developers: income recognition: property income

Rent received by a builder from a property held as trading stock should in law be excluded from the computation of trade profits and charged as property income (see BIM41000 onwards). Any excess of property business deductions over receipts may, however, be allowed as a trading expense instead of being treated as a property income loss.

A builder or property dealer may acquire a property, such as a block of flats, and buy out the tenants over a period, with a view to selling on the whole block. In such a case the expenses of the let flats should be separated from those relating to flats which are no longer let and have therefore ceased to be part of the property business. Expenses attributable to the unlet flats can only be deducted in computing the profit or loss of the property dealing trade.