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HMRC internal manual

Property Income Manual

Income excluded from UK property business: other property income

For IT cases from 2005-06 onwards these rents and adjustments are treated as property income and charged under Part 3 of ITTOIA05. The relevant property income is:

  • Chapter 7: adjustment income – see BIM34000.
  • 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 – see below.

Although these rents and adjustments are treated as property income they do not form part of the person’s property business and so are not brought into account in calculating the profits of a property business. Instead, Part 3 ITTOIA creates a separate tax charge under miscellaneous income.

For CT cases from 2009-10 onwards these rents and adjustments are treated as property income and charged under Part 3 of CTA09. The relevant property income is:

  • CTA09/S261: adjustment on change of basis
  • Chapter 7: rent receivable in connection with UK section 39(4) concern
  • Chapter 8: rent receivable for UK electric-line wayleaves – see PIM1118
  • Chapter 9: post-cessation receipts - see PIM3010 

Under ICTA88 certain property income was assessable as miscellaneous income. The relevant property income 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).

The loss treatment follows the profits calculation and so losses from the rents and adjustments listed above are separate to the property business losses and so cannot be set against property business profits.

For further information regarding losses please refer to the legislation:

  • 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.
  • 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.

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.
  • 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)
  • 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 – BIM90080.
  • Case VI: general - BIM80100.