Income Tax (Trading and Other Income) Act 2005

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

Charge to tax on profits of a property business U.K.

268 Charge to tax on profits of a property business U.K.

Income tax is charged on the profits of a property business.

269 Territorial scope of charge to tax U.K.

(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).

270 Income charged U.K.

(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).

271 Person liable U.K.

The person liable for any tax charged under this Chapter is the person receiving or entitled to the profits.

Calculation of profits U.K.

272 Profits of a property business: application of trading income rules U.K.

(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
[F1 In Chapter 10A (long funding leases)—
Sections 148A to 148J	Leases of plant or machinery: special rules for long funding leases]
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.

Textual Amendments

F1 S. 272(2) Table: entry relating to Ch. 10A (long funding leases) inserted (with effect as mentioned in Sch. 8 para. 15 of the amending Act) by Finance Act 2006 (c. 25), s. 81, Sch. 8 para. 14(2)

273 Amounts not brought into account as part of a property business U.K.

(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.

274 Relationship between rules prohibiting and allowing deductions U.K.

(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.

Apportionment of profits U.K.

275 Apportionment etc. of profits to tax year U.K.

(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.