RPSM07109300 – Technical pages: Investments: taxable property: Direct holding of taxable property: Example of amounts chargeable on income/deemed income

Example of amounts chargeable on income/deemed income

The XYZ investment-regulated pension scheme acquires a taxable property for a member on 1 September 2006 at a total cost of £110,000 when its market value is £100,000. It is let to a tenant at an initial rent net of expenses of £7,000 pa. The net rent increases in 2007/8 to £10,500. The RPI increase from acquisition to 5/4/2007 is 1.5%. The RPI increase for 2007/8 is 3%.

2006/7

The deemed value is (100000 + 0) x (1 + 0.015) = 101500

Deemed income is 101500 x 10% x 217/365 = 6034

(The scheme only holds the taxable property for 217 days so the deemed income is apportioned)

Actual net income is 7000 x 7/12 = 4083

So the scheme chargeable payment is 6034.

2007/8

The deemed value is (101500 + 0) x (1 + 0.03) = 104545.

Deemed income is 104545 x 10% = 10454

Actual net income is £10,500

So the scheme chargeable payment is the actual rent received of £10,500