Property business losses

By Tolley
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  • Income tax rules
  • Cap on unlimited income tax reliefs
  • Corporation tax rules
  • Commencement of a property business
  • Cessation of a property business
Income tax rules
Normal rules

Property business losses cannot usually be offset against the individual’s other income and gains for the year.

ITA 2007, ss 118–120

Instead the loss is carried forward and set against future profits of the same property business.

An individual’s UK property business and overseas property business are treated as separate businesses. This means that UK property business losses can be set against UK property business profits only and overseas property business losses can be set against overseas property business profits only.

If the following year’s profits are too small to absorb the loss brought forward (or if there is a loss in the following year) the unused loss is carried forward indefinitely so long as the same business continues (see below for a discussion on the cessation of a property business).

If the taxpayer receives rental income in another capacity (eg as a trustee or partner in a partnership), this is a separate property business. So, for example, UK property business losses arising in a partnership cannot be offset against UK property business profits arising to the partner as an individual.

PIM1020

See also Simon’s Taxes B6.203 (subscription sensitive).

Property business losses set against income from furnished holiday lettings

However, although furnished holiday lets (FHLs) are normally considered to be a separate business for tax purposes, it is possible to set UK property business losses against profits from a UK FHL business. This is confirmed by pages UKPN7 and UKPN16 of the UK property notes  (2013/14 version). It is also possible to set earlier years’ brought forward losses of a UK property business against profits of a UK FHL business, as confirmed by page UKPN17 of the UK property notes (2013/14 version). The 2013/14 version of the notes has more detail on this

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