Property Income Manual

PIM1115 - Wayleaves and other income: Wayleaves & easements - CT

Payments for wayleaves

Rent received in respect of a wayleave is taxed as property income by Chapter 3 of Part 4 of CTA09 as income generated from land. It is within the property business unless it falls within:

• Chapter 7 (rent receivable in connection with a UK section 39(4) concern), see PIM1117.

• Chapter 8 (rent receivable for UK electric-line wayleaves), see PIM1118.

If a single lump sum payment is received for the grant of rights in perpetuity or for a specified number of years see CG12955.

Payments for disturbance and payments for re-instatement of land are not rents receivable for wayleaves. Income receipts are assessable as property income or trading income as appropriate. Where a lump sum payment is regarded as capital, any corresponding expenditure should be excluded from the computations of trading or property income. See below for more on disturbance and reinstatement of land.

Alternative basis of charge – CTA09/S45

CTA09/S45 provides that in certain circumstances the rent receivable for certain wayleaves may be chargeable as trading income rather than property income.

Under s45(3) if a person:

• carries on a trade on some or all of the land to which a wayleave relates, and

• rent is receivable, or expenses are incurred, by the trader in respect of the wayleave, and

• they would otherwise be liable to tax under Part 3 of ITTOIA (property income) in respect of the rent for the wayleave

then both the rent receivable and the expenses incurred may be brought into account in calculating the profits of the person's trade.

The meaning of 'rent' in this context CTA09/S45(4) includes:

• any receipt that would otherwise be a receipt of a UK property business or an overseas property business, and
• any other receipt in the nature of rent.

Definition of wayleave

CTA09/S45(5) defines a wayleave to mean an easement, servitude or right in or overland which is enjoyed in connection with:

• an electric, telegraph or telephone wire or cable,

• a pipe for the conveyance of any thing, or

• any apparatus used in connection with such a pipe.

CTA09/S45(6) makes it clear that the rights enjoyed include:

• the use of a pole or pylon supporting such a wire or cable, and

• apparatus used in connection with such a wire or cable.

CTA09/S45 applies to professions and vocations as well as to trades. See BIM67600.

Payments for disturbance

Payments for disturbance are not wayleaves.

If they are paid to a trader (e.g. a farmer) in respect of disturbance to the trade they should be treated as trade receipts.

If they are not referable to a trade, they will have arisen out of the recipient's interest in the land and should be taxed as property receipts.

Lump sum payments for disturbance will normally be of a capital nature (unless the payment is made to fill a hole in profits as opposed to compensate for damage).

Costs of re-instatement of land

Where there is expenditure on repairs of damage to land or buildings etc. covered by the compensation payment, this will be an allowable deduction either for trading or property profits if the compensation is chargeable to CT.

Where a lump sum payment is regarded as capital, any corresponding expenditure should be excluded from the computations of trading or property profits.