Property income

By Tolley
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The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Property income
  • Type of property business
  • Start of a property business
  • Income and expenses
  • Losses of a property business
  • End of a property business
  • Reporting

It is common for trustees to receive rental income from properties held as investments.

In general, the same tax principles of property businesses apply to persons, whether they are individuals, trustees or personal representatives, but there are some differences. These principles, and the exceptions which apply to trustees, are discussed below.

All references to guidance notes in the Personal Tax (PT) module are subscription sensitive.

Type of property business

For income tax purposes, rental profits from land and buildings are categorised as either:

  • a UK property business, or
  • an overseas property business (see the Overseas property businesses guidance note in the PT module)

ITTOIA 2005, ss 264–265

England, Wales, Scotland and Northern Ireland make up the countries of the UK. The Isle of Man and the Channel Islands are treated as overseas for the purposes of the legislation.

This means that UK rental profits are pooled together and reported as one business and overseas rental profits are pooled together and reported as one business.

The exceptions to this are:

  • furnished holiday lettings which are calculated and reported separately (see the Furnished holiday lets guidance note in the PT module)
  • properties let at an uncommercial rent, as the expenses are limited to the amount of the rent (PIM2130)

If the trustee runs a property business in another capacity (eg as an individual or a partner in a partnership), this is a separate property business. For example, UK property business losses arising in a trust cannot be offset against UK property business profits arising to the trustee as an individual on his own behalf.

This guidance note

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