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HMRC internal manual

Property Income Manual

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Income excluded from UK property business: rent receivable in connection with mines, quarries and similar concerns: IT cases for 2005-06 onwards

Rent receivable in connection with mines, quarries and similar concerns

ITTOIA05/S335 charges tax on ‘rent receivable in connection with a UK section12(4) concern’. The concerns listed in ITTOIA05/S12 (4) are:

  • mines and quarries (including gravel pits, sand pits and brick fields),
  • ironworks, gasworks, salt springs or works, alum mines or works and waterworks and streams of water,
  • canals, inland navigations, docks and drains or levels,
  • rights of fishing,
  • rights of markets and fairs, tolls, bridges and ferries,
  • railways and other kinds of way, and
  • other concerns of a like nature to those above,

The profits arising from such concerns have traditionally been taxed as if they were profits of a trade and the rents received by landlords have traditionally been taxed under Schedule D rather than Schedule A. This was in order to tax the full amount of the profits.

Under ICTA88/S119 rent payable in connection with mines, quarries and similar concerns in the UK was charged under Schedule D Case VI unless the rent was paid in produce of the concern. Then ICTA88/S119 (2) provided for the rent to be taxed under Schedule D Case III.ICTA88/S119 (2) has not been reproduced in ITTOIA05.

Under ITTOIA05 there is a separate charge to tax under ITTOIA05/S335 equivalent to the old Schedule D Case VI charge. To preserve the existing IT loss rules:

  • For 2005-06 and 2006-07 this income is subject to the Schedule D Case VI loss regime in ICTA88/S392. Chapter 8 of Part 3 of ITTOIA05, which includes ITTOIA05/S335, is listed in ICTA88/S836B.
  • For 2007-08 onwards this income is subject to the loss regime in ITA07/S152 and S153. Chapter 8 of Part 3 of ITTOIA05 is listed in ITA07/S1016.

What rent is charged under ITTOIA05/S335

Rent is receivable in connection with a UK section 12(4) concern if it is receivable in respect of an estate, interest or right in or over land in the UK, and either:

  • The estate, interest or right is used, occupied or enjoyed in connection with a section 12(4) concern, or
  • The lease or other agreement under which rent is receivable provides for that rent to be recouped by reducing royalties or similar payments, and the reduction applies if the estate, interest or right is used, occupied or enjoyed in connection with a section 12(4) concern.

The meaning of ‘rent’ in this context is extended by ITTOIA05/S336 (3) to include:

  • any receipt that would otherwise be a receipt of a UK property business, and
  • any other receipt in the nature of rent.

Tax is normally charged on the full amount of the profits arising in the tax year. But where the landlord:

  • lets a right to work minerals in the UK and incurs management expenses - see RE1950.
  • receives mineral royalties - see BIM62090 and CG71700.

Priority between Chapters within Part 3 of ITTOIA

Any receipt, so far as it falls within:

  • Chapter 3 so far as it relates to a UK property business, and
  • Chapter 8 (rent receivable in connection with a UK section 12(4) concern),

is dealt with under Chapter 8.

Any receipt, so far as it falls within:

  • Chapter 8 (rent receivable in connection with a UK section 12(4) concern), and
  • Chapter 9 (rent receivable for UK electric-line wayleaves),

is dealt with under Chapter 9 - ITTOI05/S262.

Wayleaves

If the rent is a payment for a wayleave see PIM1115 and PIM1118.