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Income Tax (Trading and Other Income) Bill


Income Tax (Trading and Other Income) Bill
Part 3 — Property income
Chapter 6 — Commercial letting of furnished holiday accommodation

150

 

(4)   

“The number of let days” for a tax year of any accommodation is the number

of days during the relevant period for which it is commercially let by the

person as holiday accommodation to members of the public.

(5)   

Qualifying holiday accommodation may not be specified in more than one

election for a tax year.

5

(6)   

An election for a tax year must be made on or before the first anniversary of the

normal self-assessment filing date for the tax year.

Separate profit calculations

327     

Capital allowances and loss relief

(1)   

If a UK property business consists of both—

10

(a)   

the commercial letting of furnished holiday accommodation (“the

furnished holiday lettings part”), and

(b)   

other businesses or transactions (“the other part”),

   

this section requires separate calculations to be made of the profits of the

furnished holiday lettings part and the other part.

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(2)   

The calculations must be made if—

(a)   

section 248 or 249 of CAA 2001 (giving effect to allowances and

charges) applies to the furnished holiday lettings part or the other part,

or

(b)   

any provision of Chapter 1 of Part 10 of ICTA (loss relief) applies in

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relation to a loss made in either of those parts.

(3)   

If there is a letting of accommodation only part of which is holiday

accommodation, such apportionments are to be made for the purposes of this

section as are just and reasonable.

328     

Earned income and relevant UK earnings for pension purposes

25

(1)   

If a UK property business consists of both—

(a)   

the commercial letting of furnished holiday accommodation (“the

furnished holiday lettings part”), and

(b)   

other businesses or transactions,

   

this section requires a separate calculation to be made of the profits of the

30

furnished holiday lettings part.

(2)   

The calculation must be made if the profits of the furnished holiday lettings

part are treated as—

(a)   

earned income under section 833(4)(c) of ICTA, or

(b)   

income regarded as relevant UK earnings for pension purposes under

35

section 189(2)(b) of FA 2004.

(3)   

If there is a letting of accommodation only part of which is holiday

accommodation, such apportionments are to be made for the purposes of this

section as are just and reasonable.

 
 

Income Tax (Trading and Other Income) Bill
Part 3 — Property income
Chapter 7 — Adjustment income

151

 

Chapter 7

Adjustment income

Adjustment on change of basis

329     

Application of Chapter

(1)   

This Chapter applies if—

5

(a)   

a person carrying on a UK property business changes, from one period

of account to the next, the basis on which profits of the business are

calculated for income tax purposes,

(b)   

the old basis accorded with the law or practice applicable in relation to

the period of account before the change, and

10

(c)   

the new basis accords with the law and practice applicable in relation

to the period of account after the change.

(2)   

The practice applicable in any case means the accepted practice in cases of that

description as to how profits of a UK property business should be calculated

for income tax purposes.

15

(3)   

Subsections (3) to (6) of section 227 (what is meant by a person changing the

basis on which profits are calculated) apply for the purposes of this section as

they apply for the purposes of that section (but as if any reference to a trade

were to a UK property business).

330     

Adjustment income and adjustment expense

20

(1)   

An amount by way of adjustment must be calculated in accordance with

section 231, which applies in relation to a UK property business as it applies in

relation to a trade.

(2)   

If the amount produced by the calculation is positive, it is treated as income

and charged to income tax under this Chapter.

25

   

It is referred to in this Chapter as “adjustment income”.

(3)   

If the amount produced by the calculation is negative, a deduction is allowed

for it in calculating the profits of the business.

   

It is referred to in this Chapter as an “adjustment expense”.

(4)   

This section is subject to section 234 (no adjustment for certain expenses

30

previously brought into account), which applies in relation to a UK property

business as it applies in relation to a trade.

331     

Income charged

Tax is charged under this Chapter on the full amount of any adjustment

income arising in the tax year.

35

332     

Person liable

The person liable for any tax charged under this Chapter is the person

receiving or entitled to the adjustment income.

 
 

Income Tax (Trading and Other Income) Bill
Part 3 — Property income
Chapter 8 — Rent receivable in connection with a UK section 12(4) concern

152

 

Treatment of adjustment income and adjustment expense

333     

Treatment of adjustment income

(1)   

Adjustment income is treated as arising on the last day of the first period of

account for which the new basis is adopted.

(2)   

But if there is a change of basis resulting from a tax adjustment affecting the

5

calculation of any amount brought into account in respect of depreciation,

adjustment income is treated as arising only when the asset to which it relates

is realised or written off.

(3)   

Adjustment income is treated for the purposes of Chapter 1 of Part 10 of ICTA

(loss relief) as profits of the UK property business for the tax year in which tax

10

is charged on it.

334     

Treatment of adjustment expense

(1)   

An adjustment expense is treated as an expense of the business arising on the

last day of the first period of account for which the new basis is adopted.

(2)   

But if there is a change of basis resulting from a tax adjustment affecting the

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calculation of any amount brought into account in respect of depreciation, an

adjustment expense is treated as arising only when the asset to which it relates

is realised or written off.

Chapter 8

Rent receivable in connection with a UK section 12(4) concern

20

Charge to tax on rent receivable in connection with a UK section 12(4) concern

335     

Charge to tax on rent receivable in connection with a UK section 12(4) concern

Income tax is charged on rent receivable in connection with a UK section 12(4)

concern.

336     

Meaning of “rent receivable in connection with a UK section 12(4) concern”

25

(1)   

For the purposes of this Chapter rent is receivable in connection with a UK

section 12(4) concern if—

(a)   

it is receivable in respect of an estate, interest or right in or over land in

the United Kingdom, and

(b)   

the estate, interest or right is used, occupied or enjoyed in connection

30

with a concern listed in section 12(4).

(2)   

For the purposes of this Chapter rent is also receivable in connection with a UK

section 12(4) concern if—

(a)   

it is receivable in respect of an estate, interest or right in or over land in

the United Kingdom,

35

(b)   

the lease or other agreement under which it is receivable provides for

its recoupment by reducing royalties or payments of a similar nature,

and

 
 

Income Tax (Trading and Other Income) Bill
Part 3 — Property income
Chapter 8 — Rent receivable in connection with a UK section 12(4) concern

153

 

(c)   

the reduction applies if the estate, interest or right is used, occupied or

enjoyed in connection with a concern listed in section 12(4).

(3)   

In this Chapter “rent” includes—

(a)   

a receipt mentioned in section 266(3), and

(b)   

any other receipt in the nature of rent.

5

337     

Income charged

(1)   

Tax is charged under this Chapter on the full amount of the profits arising in

the tax year.

(2)   

This is subject to—

section 339 (deduction for management expenses of owner of mineral

10

rights), and

section 340 (relief in respect of mineral royalties).

338     

Person liable

The person liable for any tax charged under this Chapter is the person

receiving or entitled to the rent.

15

Management expenses of owner of mineral rights

339     

Deduction for management expenses of owner of mineral rights

(1)   

This section applies if in a tax year—

(a)   

a person lets a right to work minerals in the United Kingdom, and

(b)   

the person pays a sum wholly and exclusively as an expense of

20

management or supervision of the minerals in the tax year.

(2)   

In calculating the amount of rent receivable in connection with a UK section

12(4) concern, a deduction is allowed for the sum for the tax year.

(3)   

This is subject to section 340 (relief in respect of mineral royalties).

Mineral royalties

25

340     

Relief in respect of mineral royalties

(1)   

This section applies if in a tax year—

(a)   

a person who is UK resident, or ordinarily UK resident, is entitled to

receive mineral royalties under a mineral lease or agreement, and

(b)   

the royalties are chargeable to tax under this Chapter.

30

(2)   

In calculating the amount of the royalties so chargeable, the person is treated

as—

(a)   

entitled to receive only half of the total of the royalties arising under the

lease or agreement in the tax year, and

(b)   

paying in the tax year only half of the total of the expenses mentioned

35

in section 339(1)(b) (deduction for management expenses of owner of

mineral rights).

 
 

Income Tax (Trading and Other Income) Bill
Part 3 — Property income
Chapter 8 — Rent receivable in connection with a UK section 12(4) concern

154

 

(3)   

As to the meaning of “mineral lease or agreement” and “mineral royalties”, see

sections 341 to 343.

341     

Meaning of “mineral lease or agreement” and “mineral royalties”

(1)   

In this Chapter “mineral lease or agreement” means—

(a)   

a lease, profit à prendre, licence or other agreement conferring a right

5

to win and work minerals in the United Kingdom,

(b)   

a contract for the sale, or a conveyance, of minerals in or under land in

the United Kingdom, and

(c)   

a grant of a right under section 1 of the Mines (Working Facilities and

Support) Act 1966 (c. 4) other than an ancillary right (within the

10

meaning of that Act).

(2)   

In this Chapter “mineral royalties” means so much of any rent receivable under

a mineral lease or agreement as relates to the winning and working of minerals.

(3)   

For the purposes of this section and section 343 “minerals” means all minerals

and substances in or under land which are ordinarily worked for removal—

15

(a)   

by underground working, or

(b)   

by surface working,

   

but excluding water, peat, top-soil and vegetation.

342     

Extended meaning of “mineral royalties” etc. in Northern Ireland

(1)   

In the application of this Chapter to Northern Ireland references to mineral

20

royalties include the following periodical payments.

(2)   

The payments are—

(a)   

payments of compensation under section 29 or 35 of the Mineral

Development Act (Northern Ireland) 1969 (c. 35 (N.I.)) (“the 1969 Act”),

(b)   

payments of compensation under section 4 of the Petroleum

25

(Production) Act (Northern Ireland) 1964 (c. 28 (N.I.)) (“the 1964 Act”),

(c)   

payments made as mentioned in section 37 of the 1969 Act,

(d)   

payments made under section 55(4)(b) of the 1969 Act, and

(e)   

payments made under section 11 of the 1964 Act (payments in respect

of minerals to persons entitled to a share of royalties under section 13(3)

30

of the Irish Land Act 1903 (c. 37)).

(3)   

In the application of this Chapter to Northern Ireland references to the mineral

lease or agreement under which mineral royalties are receivable include the

enactment under which those payments are made.

343     

Power of Board to determine what counts as “mineral royalties”

35

The Board of Inland Revenue may by regulations—

(a)   

provide whether, and to what extent, rents receivable under a mineral

lease or agreement which relate both to the winning and working of

minerals and to other matters are treated as mineral royalties, and

(b)   

provide for treating the whole of such rents as mineral royalties if the

40

extent to which they relate to matters other than the winning and

working of minerals is small.

 
 

Income Tax (Trading and Other Income) Bill
Part 3 — Property income
Chapter 9 — Rent receivable for UK electric-line wayleaves

155

 

Chapter 9

Rent receivable for UK electric-line wayleaves

Charge to tax on rent receivable for UK electric-line wayleaves

344     

Charge to tax on rent receivable for a UK electric-line wayleave

Income tax is charged on rent receivable for a UK electric-line wayleave.

5

345     

Meaning of “rent receivable for a UK electric-line wayleave”

(1)   

For the purposes of this Chapter rent is receivable for a UK electric-line

wayleave if—

(a)   

it is receivable in respect of an easement, servitude or right in or over

land in the United Kingdom, and

10

(b)   

the easement, servitude or right is enjoyed in connection with an

electric, telegraph or telephone wire or cable.

(2)   

The reference to the enjoyment of an easement, servitude or right in connection

with an electric, telegraph or telephone wire or cable includes (in particular) its

enjoyment in connection with—

15

(a)   

a pole or pylon supporting such a wire or cable, or

(b)   

apparatus used in connection with such a wire or cable.

(3)   

In this Chapter “rent” includes—

(a)   

a receipt mentioned in section 266(3), and

(b)   

any other receipt in the nature of rent.

20

346     

Extent of charge to tax

(1)   

Rent receivable for a UK electric-line wayleave is not chargeable to tax under

this Chapter for a tax year if—

(a)   

a person carries on a UK property business in relation to some or all of

the land to which the wayleave relates, and

25

(b)   

receipts (other than rents receivable for UK electric-line wayleaves) in

respect of some or all of that land are brought into account in

calculating the profits of the business for the tax year.

(2)   

In such a case, the rent receivable for the UK electric-line wayleave is brought

into account in calculating the profits of the person’s UK property business.

30

(3)   

The rules for determining whether an amount is chargeable to tax under this

Chapter also need to be read with section 22(2) (payments for wayleaves if

person carries on a trade).

(4)   

That subsection secures that an amount which would otherwise be chargeable

to tax under this Chapter may be brought into account instead in calculating

35

the profits of a trade.

347     

Income charged

Tax is charged under this Chapter on the full amount of the profits arising in

the tax year.

 
 

 
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