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6. Property Income As per individuals (see chapter 3) with some notable exceptions:
(a)
The property income is always calculated on an accruals basis for the AP:
Profits of letting = taxable on an accruals basis for the AP.
Rent accrued
X
Allowable deductions
(X)
Assessable amount of lease premium (as for individuals)
X
–––
X
–––
(b)
Interest payable on a loan to buy a rental property is fully deductible against interest income
not property income under the non trading loan relationship rules. The restriction that applies
to individuals on finance expense does not apply in corporate tax.
(c)
There is no rent a room relief for companies.
(d)
If a company makes a property business loss on its properties it must be o
ff
set in full against
total profits before deduction of qualifying charitable donations of the current period - any
unused donations paid are wasted. Any excess property business loss is carried forward and
set o
ff
against any part of the total profits of the company - partial claims may be made and
therefore avoid wasting any donations paid.
7. Interest income (Loan Relationship rules) (a)
All interest receivable is assessed as interest income on an accruals basis.
(b)
Companies receive all interest gross.
(c)
Interest payable is deductible against tax adjusted trading profit if loan used for trading
purposes eg to acquire property or plant & machinery to use in the trade, or to increase
working capital.
(d)
If the loan is used for non trading purposes then it is deductible against interest income. It is
relievable on an accruals basis. The main examples of non trading loans are those taken out to
acquire a rental/investment property, as stated above, or to acquire shares.
