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PIM1104 | Use of trading income rules: application of trading income rules: IT

From HM Revenue & Customs · Property Income Manual

The profits of a property business are calculated in the same way as the profits of a trade using generally accepted accounting practice if one of condition A to E in section 271A of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA05) applies. Conditions A to E are outlined at page PIM1092.

Certain trading income rules in Part 2 of ITTOIA05 apply for the purposes of computing the profits of a property business. They are set out in S272(2) and are listed below:

In Chapter 3 (basic rules)CategoryManual
Section 26Losses calculated on same basis as profitsBIM31000 onwards
Section 27Receipts and expensesBIM31000 onwards
Section 28Items treated under CAA01 as receipts and expensesCA29320
Section 28AMoney’s worthBIM40051
Section 29InterestBIM45650 onwards
In Chapter 4 (rules restricting deductions)CategoryManual
Section 33Capital expenditureBIM35000 onwards
Section 34Expenses not wholly and exclusively for trade and unconnected lossesBIM37000 onwards
Section 35Bad and doubtful debtsBIM42700 onwards
Sections 36 and 37Unpaid remunerationBIM47130 onwards
Sections 38 to 44Employee benefit contributionsBIM44500 onwards
Sections 45 to 47Business entertainment and giftsBIM45000 onwards
Sections 48 to 50BCar hireBIM47714 onwards
Section 52Exclusion of double relief for interestBIM45765
Section 53Social security contributions
Section 54Penalties, interest and VAT surchargesBIM47090
Section 55Crime-related paymentsBIM43100 onwards
Section 55AExpenditure on integral featuresBIM46945
In Chapter 5 (rules allowing deductions)CategoryManual
Section 57Pre-trading expensesBIM46350 onwards
Sections 58 and 59Incidental costs of obtaining financeBIM45800 onwards
Section 69Payments for restrictive undertakingsBIM47005
Sections 70 and 71Seconded employeesBIM47115 - BIM47120
Section 72Payroll deduction schemes: contributions to agents' expensesBIM45195
Sections 73 to 75Counselling and retraining expensesBIM47217 – BIM47218
Sections 76 to 80Redundancy payments etc.BIM47200 onwards
Section 81Personal security expensesBIM47300 onwards
Sections 82 to 86Contributions to local enterprise organisations or urban regeneration companiesBIM47610
Sections 86A and 86BContributions to flood and coastal erosion risk management projectsBIM45100 onwards
Sections 87 and 88Scientific researchBIM45950 onwards
Sections 89 and 90Expenses connected with patents, designs and trade marksBIM45950 onwards
Section 91Payments to Export Credits Guarantee DepartmentBIM45580
Section 94ACosts of setting up SAYE option scheme or CSOP schemeBIM44020
Section 94AADeductions in relation to salaried members of limited liability partnerships
In Chapter 5A (deductions allowable at a fixed rate)CategoryManual
Section 94CExclusion of provisions of Chapter 5A for firms with partner who is not an individualBIM75000 onwards
Section 94D to 94GExpenditure on vehiclesBIM75000 onwards
In Chapter 6 (receipts)CategoryManual
Section 96Capital receiptsBIM35002
Section 97Debts incurred and later releasedBIM40265
Section 104Distribution of assets of mutual concernsBIM24550 onwards
Section 105Industrial development grantsBIM40465
Section 106Sums recovered under insurance policies etc.BIM40750 onwards
In Chapter 7 (gifts to charities etc.)CategoryManual
Section 109Receipt by donor or connected person of benefit attributable to certain giftsBIM45180
In Chapter 10A (long funding leases)CategoryManual
Sections 148A to 148JLeases of plant or machinery: special rules for long funding leasesPlease note rules introduced by FA06. See commencement provisions at FA 2006, Sch 8, Paras 15-27 for more details.BLM40100 onwards
In Chapter 11 (other specific trades)Category
Section 155Levies and repayments under the Financial Services and Markets Act 2000
In Chapter 13 (deductions from profits)CategoryManual
Sections 188 to 191Unremittable amountsBIM42750