Part 3 U.K.Property income

Chapter 3 U.K.Profits of property businesses: basic rules

[F1 Tax reduction for non-deductible costs of a dwelling-related loan U.K.

Textual Amendments

F1 Ss. 274A, 274B and cross-heading inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), s. 24(5)

274A Tax reduction for individuals U.K.

(1) Subsections (2) to (5) apply if—

(a) an amount (“A”) would be deductible in calculating the profits for income tax purposes of a property business for a tax year but for section 272A, and

(b) a particular individual is liable to income tax on N% of those profits, where N is a number—

(i) greater than 0, and

(ii) less than or equal to 100.

(2) The individual is entitled to relief under this section for the tax year in respect of an amount (the “relievable amount”) equal to N% of A.

(3) Subject to subsection (4), the amount of the relief is given by—

where BR is the basic rate of income tax for the year, and L is the lower of—

a

the total of—

(i)

the relievable amount, and

(ii)

any difference available in relation to the individual and the property business for carry-forward to the year under subsection (5), and

b

the profits for income tax purposes of the property business for the year after any deduction under section 118 of ITA 2007 (“the adjusted profits”) or, if less, the share of the adjusted profits on which the individual is liable to income tax.

(4) If the individual's gross finance-costs relief for the year (“GFCR”) is greater than the individual's adjusted total income for the year (“ATI”), the amount of the relief under this section for the year in respect of the relievable amount is—

where BR and L have the same meaning as in subsection (3).

(5) Where the amount (“AY”) of the relief under this section for the year in respect of the relievable amount is less than—

where BR is basic rate of income tax for the year and T is the total found at subsection (3)(a), the difference between—

a

T, and

b

AY divided by BR (with BR expressed as a fraction for this purpose),

is available in relation to the individual and the property business for carry-forward to the following tax year.

(6) For the purposes of this section—

(a) an individual's adjusted total income for a tax year is the individual's total income for that year less the total of—

(i) so much of that total income as is savings income,

(ii) so much of that total income as is dividend income, and

(iii) any allowances to which the individual is entitled for that year under Chapter 2 of Part 3 of ITA 2007 (individuals: personal and blind person's allowance), and

(b) an individual's gross finance-costs relief for a tax year is the total relief to which the individual is entitled for the year under this section before any adjustment under subsection (4).

274B Tax reduction for accumulated or discretionary trust income U.K.

(1) Subsections (2) to (4) apply if—

(a) an amount (“A”) would be deductible in calculating the profits for income tax purposes of a property business for a tax year but for section 272A,

(b) the trustees of a particular settlement are liable for income tax on N% of those profits, where N is a number—

(i) greater than 0, and

(ii) less than or equal to 100, and

(c) in relation to those trustees, that N% of those profits is accumulated or discretionary income.

(2) The trustees of the settlement are entitled to relief under this section for the tax year in respect of an amount (“the relievable amount”) equal to N% of A.

(3) The amount of the relief is given by—

where BR is the basic rate of income tax for the year, and L is the lower of—

a

the total of—

(i)

the relievable amount, and

(ii)

any difference available in relation to the trustees of the settlement and the property business for carry-forward to the year under subsection (4), and

b

the profits for income tax purposes of the property business for the year after any deduction under section 118 of ITA 2007 (“the adjusted profits”) or, if less, the share of the adjusted profits—

(i)

on which the trustees of the settlement are liable to income tax, and

(ii)

which, in relation to the trustees of the settlement, is accumulated or discretionary income.

(4) Where the amount (“AY”) of the relief under this section for the year in respect of the relievable amount is less than—

where BR is the basic rate of income tax for the year and T is the total found at subsection (3)(a), the difference between—

a

T, and

b

AY divided by BR (with BR expressed as a fraction for this purpose),

is available in relation to the trustees of the settlement and the property business for carry-forward to the following tax year.

(5) In this section “accumulated or discretionary income” has the meaning given by section 480 of ITA 2007.]