GREIT01025 - Background: key concepts: property rental business: excluded business

Schedule 16 excludes certain types of activity from the definition of property rental business. Part 1 excludes types of business; Part 2 excludes types of income. The Schedule contains powers to use regulations to add more types of business or income to the excluded list, and to amend or remove classes already listed. There are however no powers to add to the types of business that are within the definition of property rental business. The classes of excluded business are below. See GREIT01035 for classes of excluded income.

Incidental letting of property held in connection with a trade in property

The trade can be either development (i.e. building and refurbishing for sale) or buying and selling property. Whether or not a property is held as trading stock is a question of fact, and the HMRC views on the subject are at BIM60015 onwards. No special or different rules apply to decide if property acquired or developed by a UK-REIT is by way of trade.

Letting of temporarily surplus accommodation

This excludes rent from letting out space that is otherwise used for administration of the property rental business. It applies where the space let is small compared with the space occupied for administrative purposes, and the letting is for no more than three years. The aim of this exclusion is avoid the tax complications of small parcels of property crossing from one side of the ring fence to the other.

Services provided to tenants of overseas properties

Income from the provision of services in connection with letting an overseas property are generally bundled up into a single Schedule D Case V assessment, without necessarily distinguishing between income of an overseas property business and income from other overseas possessions. This exclusion is to ensure that if the same services were provided in connection with letting a UK property, and the income would be excluded from Schedule A, then it would also be excluded from qualifying as part of 'property rental business'.

Structured finance arrangements

Some kinds of structured finance arrangements give rise to Schedule A income. Where sections 774B or 774D ICTA apply to the arrangements, the activities that give rise to the Schedule A income are excluded from the definition of 'property rental business'.

Owner-occupied property

This exclusion applies in two circumstances. One is intra-group; the other is in connection with 'stapled' companies. See GREIT01030 for more detail.