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HMRC internal manual

Property Income Manual

Beginning and end of a rental business: commencement


  • Usually a rental business begins when letting first commences.
  • Allowable revenue expenditure incurred before the rental business begins can be relieved under the ICTA88/S401 or ITTOIA05/S57 provisions for pre-trading expenditure.

Start of rental business

The date a rental business begins is a question of fact that depends on the nature of the rental business. Normally a rental business will begin when the taxpayer first enters into a transaction that exploits their land or property in a way which gives rise to a receipt of some kind.

Where the rental business is letting property, the business can’t begin until the first property is let. You need to distinguish between activities that are preparatory to letting and those business activities that are part of letting. Once a rental business has started, all activities will be treated as carried out in the course of one business, subject to the points made in PIM1020 about businesses carried on in different capacities and the points made at PIM1030 about partnerships.

Thus, after the first property has been let, any later expenditure leading up to the letting of the second and later properties is part of the rental business and can be deducted - provided it meets the conditions outlined at PIM2000 onwards (it is incurred wholly and exclusively for the purpose of the business, it isn’t capital expenditure etc).

The question of when a rental business starts normally only arises, therefore, when a taxpayer receives income from property for the first time, or begins to exploit their land and property for a profit for the first time. Less commonly, it may arise if a taxpayer resumes letting again having ceased an earlier rental business - see below.

The start date can be important because it can affect the amount of expenditure allowable in calculating rental business profits. Some expenditure incurred before the business begins may not be allowable but some may be allowable under special rules, if so, the deduction is given in computing the profits of the business in the first year. See next paragraph for more on expenses incurred before the business begins.

Expenses incurred before rental business begins

A taxpayer may incur expenses for the purposes of a rental business before that business starts. If so, they may be able to claim a deduction for them once the letting begins, (ICTA88/S401 or ITTOIA05/S57). Relief is only due under these special rules where the expenditure:

  • is incurred within a period of seven years before the date the rental business is started, and
  • is not otherwise allowable as a deduction for tax purposes, and
  • would have been allowed as a deduction if it had been incurred after the rental business started.

This means that, to be allowable, the expenditure must be incurred wholly and exclusively for the purposes of the rental business and must not be capital expenditure etc (see PIM2000 onwards). Thus, for example, rent paid to lease the first rental business property could be allowable under these special rules if it is due before the property is first let provided the property was acquired solely for the purposes of the rental business.

Relief isn’t due under the special rules for, say, rent on the taxpayer’s own private residence which is payable before they begin to let it (after, say, taking a job in another part of the country). Their expenditure on rent was not incurred wholly and exclusively for the purposes of their rental business - it was incurred to provide them with a home. Relief would be due under the ordinary rental business rules for rent for periods after the property was let commercially.

Qualifying pre-commencement expenditure is treated as incurred on the day on which the taxpayer first carries on their rental business. This is deducted, together with the other allowable expenses of letting, from the total receipts of the business for that year.


For CT cases (and IT cases to 2004-05) ICTA88/S401 is applied by ICTA88/S21B.

For IT cases (for 2005-06 onwards) ITTOIA05/S57 is applied by ITTOIA05/S272.

Further guidance

For detailed guidance on pre-trading expenditure see BIM46350.

Capital allowances

Capital expenditure does not qualify for relief but there are also further special rules for capital allowances. Broadly they work in a similar way to those just outlined for revenue expenditure. Thus, for example, expenditure incurred on constructing a factory before the rental business begins may qualify for industrial building allowances once the building is in use for a qualifying purpose. For detailed guidance see the Capital Allowances manual.