Valid from 06/04/2005
Income tax is charged on the profits of a property business.
(1)Profits of a UK property business are chargeable to tax under this Chapter whether the business is carried on by a UK resident or a non-UK resident.
(2)Profits of an overseas property business are chargeable to tax under this Chapter only if the business is carried on by a UK resident.
(3)But, in the case of an overseas property business carried on by a UK resident to whom the remittance basis applies, the only profits of the business chargeable to tax under this Chapter are those in respect of land in the Republic of Ireland.
(4)For a UK resident to whom the remittance basis applies, see also Chapter 11 (charge to tax on overseas property income other than income arising in Republic of Ireland).
(1)Tax is charged under this Chapter on the full amount of the profits arising in the tax year.
(2)Subsection (1) is subject to Part 8 (foreign income: special rules).
The person liable for any tax charged under this Chapter is the person receiving or entitled to the profits.
(1)The profits of a property business are calculated in the same way as the profits of a trade.
(2)But the provisions of Part 2 (trading income) which apply as a result of subsection (1) are limited to the following—
| In Chapter 3 (basic rules)— | |
| section 25 | generally accepted accounting practice |
| section 26 | losses calculated on same basis as profits |
| section 27 | receipts and expenses |
| section 28 | items treated under CAA 2001 as receipts and expenses |
| section 29 | interest |
| In Chapter 4 (rules restricting deductions)— | |
| section 33 | capital expenditure |
| section 34 | expenses not wholly and exclusively for trade and unconnected losses |
| section 35 | bad and doubtful debts |
| sections 36 and 37 | unpaid remuneration |
| sections 38 to 44 | employee benefit contributions |
| sections 45 to 47 | business entertainment and gifts |
| sections 48 to 50 | car or motor cycle hire |
| section 51 | patent royalties |
| section 52 | exclusion of double relief for interest |
| section 53 | social security contributions |
| section 54 | penalties, interest and VAT surcharges |
| section 55 | crime-related payments |
| In Chapter 5 (rules allowing deductions)— | |
| section 57 | pre-trading expenses |
| sections 58 and 59 | incidental costs of obtaining finance |
| section 68 | replacement and alteration of trade tools |
| section 69 | payments for restrictive undertakings |
| sections 70 and 71 | seconded employees |
| section 72 | payroll deduction schemes: contributions to agents' expenses |
| sections 73 to 75 | counselling and retraining expenses |
| sections 76 to 80 | redundancy payments etc. |
| section 81 | personal security expenses |
| sections 82 to 86 | contributions to local enterprise organisations or urban regeneration companies |
| sections 87 and 88 | scientific research |
| sections 89 and 90 | expenses connected with patents, designs and trade marks |
| section 91 | payments to Export Credits Guarantee Department |
| In Chapter 6 (receipts)— | |
| section 96 | capital receipts |
| section 97 | debts incurred and later released |
| section 104 | distribution of assets of mutual concerns |
| section 105 | industrial development grants |
| section 106 | sums recovered under insurance policies etc. |
| In Chapter 7 (gifts to charities etc.)— | |
| section 109 | receipt by donor or connected person of benefit attributable to certain gifts |
| In Chapter 11 (other specific trades)— | |
| section 155 | levies and repayments under FISMA 2000 |
| In Chapter 13 (deductions from profits)— | |
| sections 188 to 191 | unremittable amounts |
(3)In those provisions the expression “this Part” is to be read as a reference to those provisions as applied by subsection (2) and to the other provisions of Part 3.
(1)The rules for calculating the profits of a property business need to be read with the following provisions of Part 2 (trading income)—
(a)section 19 (tied premises),
(b)section 20 (caravan sites where trade carried on),
(c)section 21 (surplus business accommodation), and
(d)section 22(3) (payments for wayleaves).
(2)Those provisions secure that amounts which would otherwise be brought into account in calculating the profits of the business are, or may be, brought into account instead in calculating the profits of a trade.
(1)Any relevant permissive rule in this Part—
(a)has priority over any relevant prohibitive rule in this Part, but
(b)is subject to sections 48 (car or motor cycle hire) and 55 (crime-related payments), as applied by section 272.
(2)In this section “any relevant permissive rule in this Part” means any provision of this Part (apart from sections 291 to 294) which allows a deduction in calculating the profits of a property business.
(3)In this section “any relevant prohibitive rule in this Part”, in relation to any deduction, means any provision of this Part (apart from sections 48 and 55, as applied by section 272) which might otherwise be read as—
(a)prohibiting the deduction, or
(b)restricting the amount of the deduction.
(4)In this section any reference to any provision of this Part includes any provision applied by section 272.
(1)This section applies if a period of account of a property business does not coincide with a tax year.
(2)Any of the following steps may be taken if they are necessary in order to arrive at the profits or losses of the tax year—
(a)apportioning the profits or losses of a period of account to the parts of that period falling in different tax years, and
(b)adding the profits or losses of a period of account (or part of a period) to profits or losses of other periods of account (or parts).
(3)The steps must be taken by reference to the number of days in the periods concerned.
(4)But the person carrying on the business may use a different way of measuring the length of the periods concerned if—
(a)it is reasonable to do so, and
(b)the way of measuring the length of periods is used consistently for the purposes of the business.