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HMRC internal manual

Property Income Manual

Use of trading income rules: application of trading income rules: IT

The profits of a rental business are calculated in the same way as the profits of a trade.

The trading income rules in Part 2 of ITTOIA05 that apply for the purposes of computing the profits of a rental business are set out in ITTOIA05/S272 (2). They are listed below:

In Chapter 3 (basic rules)   Instructions
Section 25 Generally accepted accounting practice BIM31000 onwards
Section 26 Losses calculated on same basis as profits BIM31000 onwards
Section 27 Receipts and expenses BIM31000 onwards
Section 28 Items treated under CAA01 as receipts and expenses CA29320
Section 29 Interest BIM45650 onwards


In Chapter 4 (rules restricting deductions)   Instructions
Section 33 Capital expenditure BIM35000 onwards
Section 34 Expenses not wholly and exclusively for trade and unconnected losses BIM37000 onwards
Section 35 Bad and doubtful debts BIM42700 onwards
Sections 36 and 37 Unpaid remuneration BIM47130 onwards
Sections 38 to 44 Employee benefit contributions BIM44500 onwards
Sections 45 to 47 Business entertainment and gifts BIM45000 onwards
Sections 48 to 50 Car or motor cycle hire BIM47700 onwards
Section 52 Exclusion of double relief for interest BIM45765
Section 53 Social security contributions  
Section 54 Penalties, interest and VAT surcharges BIM47090
Section 55 Crime-related payments BIM43100 onwards


In Chapter 5 (rules allowing deductions)   Instructions
Section 57 Pre-trading expenses BIM46350 onwards
Sections 58 and 59 Incidental costs of obtaining finance BIM45800 onwards
Section 68 Replacement and alteration of trade tools BIM46935
Section 69 Payments for restrictive undertakings BIM47005
Sections 70 and 71 Seconded employees BIM47115 - BIM47120
Section 72 Payroll deduction schemes: contributions to agents’ expenses BIM45210
Sections 73 to 75 Counselling and retraining expenses BIM47060
Sections 76 to 80 Redundancy payments etc. BIM47200 onwards
Section 81 Personal security expenses BIM47300 onwards
Sections 82 to 86 Contributions to local enterprise organisations or urban regeneration companies BIM47610
Sections 87 and 88 Scientific research BIM45955
Sections 89 and 90 Expenses connected with patents, designs and trade marks BIM45950 onwards
Section 91 Payments to Export Credits Guarantee Department BIM45580


In Chapter 6 (receipts)   Instructions
Section 96 Capital receipts BIM35000 onwards
Section 97 Debts incurred and later released BIM40265
Section 104 Distribution of assets of mutual concerns BIM24550 onwards
Section 105 Industrial development grants BIM40465
Section 106 Sums recovered under insurance policies etc. BIM40750 onwards


In Chapter 7 (gifts to charities etc.)   Instructions
Section 109 Receipt by donor or connected person of benefit attributable to certain gifts BIM45180


In Chapter 10A (long funding leases)   Instructions
Sections 148A to 148J Leases of plant or machinery: special rules for long funding leases  
Please note rules introduced by FA06. See commencement provisions at FA 2006, Sch 8, Paras 15-27 for more details. BLM40100 onwards


In Chapter 11 (other specific trades) Instructions
Section 155 Levies and repayments under FISMA 2000


In Chapter 13 (deductions from profits)   Instructions
Sections 188 to 191 Unremittable amounts BIM42750