HMRC internal manual

Property Income Manual

PIM1056 - Income chargeable: rent-charges, ground annuals, feu duties

A rentcharge or ground annual is a periodical sum of money payable out of land and not attributable to tenure. Such sums are taxable as property income. A rentcharge is not rent under a lease and may be payable even in respect of freehold property. It may be perpetual or for a fixed term of years. It has not been possible to create new rentcharges since 21 August 1977, with minor exceptions (Section 2 (1) Rentcharges Act 1977).

Feu duties are annual sums payable in respect of grants of land in feu in Scotland. Feu duties are also taxable as property income. It has not been possible to create new feu duties or ground annuals since 1 November 1974 (Land Tenure Reform (Scotland) Act 1974).

The payer of a rentcharge, ground annual or feu duty may make a payment to discharge or redeem it. Such payments should normally be regarded as capital in the hands of both the payer and the recipient. Any tax liability for the recipient will be to capital gains tax not income tax (see CG14507).