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

The profits of a rental 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 rental business. They are set out in S272(2) and are listed below:

In Chapter 3 (basic rules)	Category	Manual
Section 26	Losses calculated on same basis as profits	BIM31000 onwards
Section 27	Receipts and expenses	BIM31000 onwards
Section 28	Items treated under CAA01 as receipts and expenses	CA29320
Section 28A	Money’s worth	BIM40051
Section 29	Interest	BIM45650 onwards

 

In Chapter 4 (rules restricting deductions)	Category	Manual
Section 33	Capital expenditure	BIM35000 onwards
Section 34	Expenses not wholly and exclusively for trade and unconnected losses	BIM37000 onwards
Section 35	Bad and doubtful debts	BIM42700 onwards
Sections 36 and 37	Unpaid remuneration	BIM47130 onwards
Sections 38 to 44	Employee benefit contributions	BIM44500 onwards
Sections 45 to 47	Business entertainment and gifts	BIM45000 onwards
Sections 48 to 50B	Car hire	BIM47714 onwards
Section 52	Exclusion of double relief for interest	BIM45765
Section 53	Social security contributions
Section 54	Penalties, interest and VAT surcharges	BIM47090
Section 55	Crime-related payments	BIM43100 onwards
Section 55A	Expenditure on integral features	BIM46945

 

In Chapter 5 (rules allowing deductions)	Category	Manual
Section 57	Pre-trading expenses	BIM46350 onwards
Sections 58 and 59	Incidental costs of obtaining finance	BIM45800 onwards
Section 69	Payments for restrictive undertakings	BIM47005
Sections 70 and 71	Seconded employees	BIM47115 - BIM47120
Section 72	Payroll deduction schemes: contributions to agents' expenses	BIM45195
Sections 73 to 75	Counselling and retraining expenses	BIM47217 – BIM47218
Sections 76 to 80	Redundancy payments etc.	BIM47200 onwards
Section 81	Personal security expenses	BIM47300 onwards
Sections 82 to 86	Contributions to local enterprise organisations or urban regeneration companies	BIM47610
Sections 87 and 88	Scientific research	BIM45950 onwards
Sections 89 and 90	Expenses connected with patents, designs and trade marks	BIM45950 onwards
Section 91	Payments to Export Credits Guarantee Department	BIM45580
Section 94A	Costs of setting up SAYE option scheme or CSOP scheme	BIM44020
Section 94AA	Deductions in relation to salaried members of limited liability partnerships

 

In Chapter 6 (receipts)	Category	Manual
Section 96	Capital receipts	BIM35002
Section 97	Debts incurred and later released	BIM40265
Section 104	Distribution of assets of mutual concerns	BIM24550 onwards
Section 105	Industrial development grants	BIM40465
Section 106	Sums recovered under insurance policies etc.	BIM40750 onwards

 

In Chapter 7 (gifts to charities etc.)	Category	Manual
Section 109	Receipt by donor or connected person of benefit attributable to certain gifts	BIM45180

 

In Chapter 10A (long funding leases)	Category	Manual
Sections 148A to 148J	Leases of plant or machinery: special rules for long funding leases Please 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 155	Levies and repayments under the Financial Services and Markets Act 2000

 

In Chapter 13 (deductions from profits)	Category	Manual
Sections 188 to 191	Unremittable amounts	BIM42750