The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:
Many of the principles applying to allowable expenses for property businesses are similar to those that apply for trading. Provisions for the computation of trading income for the taxation of profits of a rental income business are at ITTOIA 2005, ss 272, 272ZA and CTA 2009, s 210.
These sections stipulate that rules which are applicable to trades are also applicable to property businesses, whether profits are calculated on the cash basis or the accruals basis, though there are some differentiations between the rules for the two bases which are outlined below.
For corporation tax purposes, some provisions cited in ITTOIA 2005, s 272 are not stated in CTA 2009, s 210. This is because they are already applicable to property businesses as they are included in CTA 2010, Part 20 of the General Calculation Rules.
As might be expected, there is a wide-ranging targeted anti-avoidance rule that prevents any deduction which arises as a result of an arrangement where the main purpose (or one of the main purposes) is to avoid tax. This rule applies to deductions from trading income as well as property income.
Note that the fixed rate deductions for expenses for self-employed people carrying on trades, professions and vocations do not apply to those carrying on a property business, see the Flat rate deductions for unincorporated businesses guidance note. This is because the rules in ITTOIA 2005, ss 94B–94I are not included in the list of provisions which apply to profits of a property business by virtue of ITTOIA 2005, s 272.
The general rules are summarised below.
The rule that expenditure must be ‘wholly and exclusively’ for the business applies. For more information, see the Wholly and exclusively guidance note.
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