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Taxation in the United Kingdom/Corporation tax/Rental income

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Rental income is taxed under Schedule A, if it arises from UK land[1], and under Case V of Schedule D if it arises from overseas land[2]. The rules for UK and overseas land are the same[3].

In most instances a company is deemed to have a single Schedule A business. If, however, it is a partner in a partnership, rental income from that partnership is deemed to be a separate Schedule A business.[4] These rules are amended for life assurance companies.[5]

Rental income is calculated in the same way as trading income[6]. In practice this means identifying the part of the profit shown in the financial statements that relates to rental income and making certain adjustments[7] There are, however, some special rules that apply to taxing rental income that do not apply to trading income.

These are:

  • A Schedule A charge can arise on mutual business[8];
  • There are special rules dealing with leases;
  • There are special rules dealing with furnished holiday accommodation;
  • There is a special rule allowing a deduction for expenditure on sea walls[9].

Notes and references

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  1. ↑ Section 15 of the Income and Corporation Taxes Act 1988
  2. ↑ Section 18 of the Income and Corporation Taxes Act 1988.
  3. ↑ Section 70A of the Income and Corporation Taxes Act 1988
  4. ↑ Section 15 of the Income and Corporation Taxes Act 1988.
  5. ↑ A life assurance company, by virtue of section 432AA of the Income and Corporation Taxes Act 1988 is deemed to have the following categories of business (for accounting periods beginning on or after 1 January 2007:
    • solely linked basic life assurance and general annuity business;
    • business linked to pension, child trust fund and/or individual savings account business;
    • solely linked non-life long-term business;
    • non-linked long-term business;
    • business outside the long-term insurance fund.
    Additionally, UK land linked to overseas life assurance business is treated as a separate Schedule A business by virtue of section 441B of the Income and Corporation Taxes Act 1988
  6. ↑ Sections 21A and 21B of the Income and Corporation Taxes Act 1988.
  7. ↑ Section 42 of the Finance Act 1998.
  8. ↑ Section 21C of the Income and Corporation Taxes Act 1988
  9. ↑ Section 30 of the Income and Corporation Taxes Act 1988
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