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.
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)).
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.