Section 796: Alternative calculation of profits: trading income
2967.This section sets out the basis of calculation when the rent-a-room income is wholly or partly trading income and it exceeds the rent-a-room limit. It is based on paragraph 11 of Schedule 10 to F(No 2)A 1992.
2968.Subsection (2)(a) makes explicit what is merely implicit in the source legislation: the retention of any balancing charge where the alternative method of calculation applies. As in exemption cases, there is no entitlement to capital allowances if the taxpayer elects for the alternative method of calculation (paragraph 11(6) of Schedule 10 to F(No 2)A 1992). But - and this differs from exemption cases - any balancing charge remains. In the source legislation the retention of the balancing charge is merely implicit in paragraph 11(6) of Schedule 10 to F(No 2)A 1992: it is simply not mentioned as part of the disapplication of the allowance under section 55 of CAA.
2969.Subsection (3)(b) gives a formula for calculating the correct deduction when the rent-a-room income consists of trading income and another type of income. In these circumstances the total rent-a-room deduction is apportioned between the rent-a-room income types.