Income Tax (Trading and Other Income) Bill

House of Commons

Session 2004 - 05
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Other Bills before Parliament

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.
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Earned income and relevant UK earnings for pension purposes
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(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
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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.
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(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
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(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.
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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.
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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”
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(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
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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,
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(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.
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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.
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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
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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
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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.
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(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
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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—
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(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
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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
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(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”
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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
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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
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(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—
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(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.
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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
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(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.
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(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
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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.