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HMRC internal manual

Property Income Manual

HM Revenue & Customs
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Deductions: specific items: apportionment on sale or purchase of let property: background


When let property is sold, there is commonly an apportionment of the income or expenses between the vendor and the purchaser. ICTA88/S40 and ITTOIA05/S320 provide that the apportionment is, broadly, followed in computing the tax liabilities of both parties.

The legislation applies for both IT and CT. However computations based on accounts using ordinary commercial principles will usually produce the result the legislation requires.

This page explains when ICTA88/S40 and ITTOIA05/S320 apply, PIM2235 describes the effect on the computation, and PIM2240 gives examples.

Technical detail

ICTA88/S40 and ITTOIA05/S320 apply to all apportionments of rents and other receipts and outgoings made between vendor and purchaser by virtue of a contract for the sale of an estate or interest in land, for example the sale of a freehold or leasehold interest, rent-charge, feu duty or ground annual.

The legislation does not apply to apportionments of income and expenses on transfer of a property other than by sale, for example on death or bankruptcy or by way of gift or exchange. Accordingly, income to which the deceased became entitled during his lifetime, or to which a bankrupt became entitled before he was adjudicated bankrupt, is wholly the income of the deceased or the bankrupt. If the property is subsequently sold by the personal representatives of the deceased or the trustee in bankruptcy, no part of that income should be treated for tax purposes as apportioned to the purchaser. Similarly, expenses paid after the date of death or bankruptcy should not be deducted in computing the liability of the deceased or the bankrupt.