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HMRC internal manual

Corporate Finance Manual

Debt Cap: the available amount: exclusions from the available amount - property income

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Income from property rental

Where a company carries on a property rental business it can, if certain conditions are met (CTA10/PT12/CH2), give notice that it is to be treated as a Real Estate Investment Trust which allow it to benefit from exemptions from corporation tax on profits and gains arising from its property rental business. CTA10/S541 ring-fences the activities that qualify for the exemption, separating them from the other activities that may be carried out.

TIOPA10/S335 excludes, from the calculation of the available amount, amounts disclosed in the financial statements where the following two conditions are met:

  • Condition A - a member of the worldwide group is treated in a relevant accounting period as carrying on a separate business under CTA10/S541 (ring fencing of tax exempt business).
  • Condition B - the external finance amount falls to be brought into account in calculating the profits arising from the business in that accounting period.

So where external finance amounts are included in calculating the profits of a company which carries on a separate business within CTA10/S541, these amounts must be disregarded for the purposes of calculating the available amount.

See GREIT04020 - Tax-exempt income: loan relationships and derivative contracts: general for further information.