PIM1113 - Income excluded from UK property business: other property income

Under ICTA88 certain property income was, and still is for CT cases, assessable under Schedule D Case VI. That is:

• An adjustment on change of basis (FA02/SCH22).
• Rent etc payable in connection with mines, quarries and similar concerns (ICTA88/S119).
• Rent etc payable in respect of electric line wayleaves (ICTA88/S120).
• Post-cessation receipts and expenses (ICTA88/S103 to S106, S108, S109A and S110).

For IT cases for 2005-06 onwards these rents and adjustments are treated as property income and charged under Part 3 of ITTOIA05 as follows:

• Chapter 7 (adjustment income).
• Chapter 8 (rent receivable in connection with a UK section 12 (4) concern) – see PIM1117.
• Chapter 9 (rent receivable for UK electric-line wayleaves) – see PIM1118.
• Chapter 10 (post-cessation receipts).

This is a separate charge to tax, equivalent to the old Schedule D Case VI charge. These rents and other amounts are not brought into account in calculating the profits of a property business.

To preserve the existing IT loss regime:

• For 2005-06 and 2006-07 this income is subject to the Schedule D Case VI loss regime in ICTA88/S392 and not the regime in ICTA88/S379A and ICTA88/S379B. ICTA88/S392 has been renamed “Losses from miscellaneous transactions” and Chapter 8, Chapter 9 and Chapter 10 of Part 3 of ITTOIA05 are listed as relevant provisions in ICTA88/S836B for the purpose of identifying the relevant miscellaneous transactions.
• For 2007-08 onwards this income is subject to the loss regime in ITA07/S152 and S153. Chapter 8, Chapter 9 and Chapter 10 of Part 3 of ITTOIA05 are listed as relevant provisions in ITA07/S1016 for the purpose of identifying the relevant miscellaneous transactions.

Post-cessation receipts

The following trading income rules (in Chapter 18 of Part 2 of ITTOIA05) cannot apply to a property business. So there is no corresponding rule in Chapter 10 of Part 3.

• Section 241: professions and vocations,
• Section 252: transfer of trading stock or work in progress; (a property business cannot have trading stock or work in progress),
• Section 253: lump sums paid to personal representatives for copyright etc; (such sums cannot arise from a property business), and
• Section 256: treatment of post-cessation receipts; (property income cannot be relevant UK earnings or earned income).

The following trading income rules apply to property businesses but are not in separate sections in Chapter 10:

• Sections 248, 249 and 250: rules about debts and post-cessation expenditure; (these rules are applied by section 354 (2)),
• Sections 254 and 255: allowable deductions; (these rules are applied by section 351 (2) (a)), and
• Section 257: election to carry back; (this rule is applied by section 351 (2) (b)).

Further guidance

More detailed guidance can be found in the Business Income Manual:

• Change of basis of computing taxable profits – BIM34000.
• Post-cessation receipts – BIM80500.
• Case VI: general – BIM80100.