Income Tax (Earnings and Pensions) Act 2003 section 207

Meaning of "annual rental value"

Section 207 defines the term "annual rental value" of land for the purposes of this Chapter, setting out how to determine what a reasonable yearly rent would be and how to adjust for any services bundled into comparative rental figures.

• The annual rental value is the rent reasonably expected on a year-to-year letting, assuming the tenant pays all taxes, rates and charges and the landlord bears repair, insurance and maintenance costs.
• Where the only available rental comparisons are for fully serviced or furnished properties, the cost of those services must be stripped out — but any profit element embedded in service charges is treated as part of the rent.
• If comparable lettings include separate payments for services on top of the basic rent, those payments must be added back to the rent figure, with limited deductions allowed only for the landlord's actual cost of providing "relevant services".
• A "relevant service" is any service other than the repair, insurance or maintenance of the land itself or any other land — meaning no deduction is permitted for charges relating to repair, insurance or maintenance of the landlord's other premises.