Chapter 4: Property losses
Overview
235.This Chapter deals with property business losses both from UK property businesses and from overseas property businesses.
Section 62: Relief for losses made in UK property business
236.This section provides relief for losses arising from a UK property business. It is based on sections 6(4), 392A and 834(2) of ICTA.
237.“UK property business” is defined in section 205 of CTA 2009. This definition is reproduced here in order to avoid the need to cross-refer:
“A company’s UK property business consists of—
(a)every business which the company carries on for generating income from land in the United Kingdom, and
(b)every transaction which the company enters into for that purpose otherwise than in the course of such a business.”
238.Subsections (4) and (5) provide that any unused losses are to be carried forward and treated as UK property business losses of later periods. In other words such unused losses may be set against total profits of later periods.
239.Subsection (6) provides that relief is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts. Examples of such restrictions or modifications are to be found in:
Sections 56 (restriction on relief for limited partners), 57 (meaning of “contribution to the firm”) and 58 (meaning of “limited partner”);
Chapter 7 of this Part (write off of government investment in a company).
Section 63: Company with investment business ceasing to carry on UK property business
240.This section provides a relaxation of the loss carry-forward rules where a company ceases to carry on a UK property business but continues to carry on an investment business. It is based on section 392A(3) of ICTA.
241.A company with investment business is defined in section 1218 of CTA 2009. This definition is reproduced here to avoid the need to cross-refer:
““company with investment business” means a company whose business consists wholly or partly of making investments.”
242.Subsection (3) refers to an unrelieved UK property business loss being carried forward to periods beyond the accounting period subsequent to that in which the UK property business ceased. Once the loss has been carried forward to the accounting period following the cessation period it loses its character as an unrelieved loss and becomes an expense of management. Hence there is no difficulty in carrying the amount forward to later accounting periods providing the investment business continues.
Section 64: UK property business to be commercial or carried on for statutory functions
243.This section provides that sections 62 and 63 only apply when a UK property business is carried on on a commercial basis or in the exercise of functions conferred by or under an Act. It is based on section 392A(5) to (7) of ICTA.
244.The reference to an Act in subsection (1) includes an Act of the Scottish Parliament. See Change 6 in Annex 1.
245.The reference to “profit” in subsection (2) is to profit in its ordinary commercial sense.
Section 65: UK furnished holiday lettings business treated as trade
246.This section provides that a UK furnished holiday lettings (UKFHL) business is treated as a trade for loss relief purposes. It is based on section 503 of ICTA.
247.If a company carries on a UKFHL business and is a member of a partnership that also carries on a UKFHL business then the two businesses must be accounted for separately as section 1270(2) of CTA 2009 provides that the firm’s UK property business cannot include business or transactions undertaken by the firm’s individual partners.
Section 66: Relief for losses made in overseas property business
248.This section sets out the rules for relieving losses made in an overseas property business. It is based on section 392B of ICTA.
249.“Overseas property business” is defined in section 206 of CTA 2009. This definition is reproduced in order to avoid the need to cross-refer:
“(a)every business which the company carries on for generating income from land outside the United Kingdom, and
(b)every transaction which the company enters into for that purpose otherwise than in the course of such a business.”
250.Subsection (3) provides that a loss from an overseas property business may be carried forward and set against future profits of that business. Such profits do not include chargeable gains.
251.Subsection (6) provides that relief is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts. Examples of such restrictions or modifications are to be found in:
Section 60 (meaning of “contribution to the LLP”); and
Chapter 7 of this Part (write off of government investment in a company).
Section 67: Overseas property business to be commercial or carried on for statutory functions
252.This section provides that section 66 only applies when an overseas property business is carried on on a commercial basis or in the exercise of functions conferred by or under an Act. It is based on sections 392A(5) to (7) and 392B(2) of ICTA.
253.The reference to an Act in subsection (1) includes an Act of the Scottish Parliament. See Change 6 in Annex 1.
254.Subsection (1) also refers to functions conferred by the law of a territory outside the United Kingdom. See Change 10 in Annex 1.
255.The reference to “profit” in subsection (2) is to profit in its ordinary commercial sense.
