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HMRC internal manual

Property Income Manual

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HM Revenue & Customs
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Income excluded from UK property business: other property income

 

Under ICTA88 certain property income was, and still is for CT cases, assessable under Schedule D Case VI. That is:

  • An adjustment on change of basis (FA02/SCH22).
  • Rent etc payable in connection with mines, quarries and similar concerns (ICTA88/S119).
  • Rent etc payable in respect of electric line wayleaves (ICTA88/S120).
  • Post-cessation receipts and expenses (ICTA88/S103 to S106, S108, S109A and S110).

For IT cases for 2005-06 onwards these rents and adjustments are treated as property income and charged under Part 3 of ITTOIA05 as follows:

  • Chapter 7 (adjustment income).
  • Chapter 8 (rent receivable in connection with a UK section 12 (4) concern) - see PIM1117.
  • Chapter 9 (rent receivable for UK electric-line wayleaves) - see PIM1118.
  • Chapter 10 (post-cessation receipts).

This is a separate charge to tax, equivalent to the old Schedule D Case VI charge. These rents and other amounts are not brought into account in calculating the profits of a property business.

To preserve the existing IT loss regime:

  • For 2005-06 and 2006-07 this income is subject to the Schedule D Case VI loss regime in ICTA88/S392 and not the regime in ICTA88/S379A and ICTA88/S379B. ICTA88/S392 has been renamed ‘Losses from miscellaneous transactions’ and Chapter 8, Chapter 9 and Chapter 10 of Part 3 of ITTOIA05 are listed as relevant provisions in ICTA88/S836B for the purpose of identifying the relevant miscellaneous transactions.
  • For 2007-08 onwards this income is subject to the loss regime in ITA07/S152 and S153. Chapter 8, Chapter 9 and Chapter 10 of Part 3 of ITTOIA05 are listed as relevant provisions in ITA07/S1016 for the purpose of identifying the relevant miscellaneous transactions.

Post-cessation receipts

The following trading income rules (in Chapter 18 of Part 2 of ITTOIA05) cannot apply to a property business. So there is no corresponding rule in Chapter 10 of Part 3.

  • Section 241: professions and vocations,
  • Section 252: transfer of trading stock or work in progress; (a property business cannot have trading stock or work in progress),
  • Section 253: lump sums paid to personal representatives for copyright etc; (such sums cannot arise from a property business), and
  • Section 256: treatment of post-cessation receipts; (property income cannot be relevant UK earnings or earned income).

The following trading income rules apply to property businesses but are not in separate sections in Chapter 10:

  • Sections 248, 249 and 250: rules about debts and post-cessation expenditure; (these rules are applied by section 354 (2)),
  • Sections 254 and 255: allowable deductions; (these rules are applied by section 351 (2) (a)), and
  • Section 257: election to carry back; (this rule is applied by section 351 (2) (b)).

Further guidance

More detailed guidance can be found in the Business Income Manual:

  • Change of basis of computing taxable profits - BIM34000.
  • Post-cessation receipts - BIM80500.
  • Case VI: general - BIM80100.