What does section 20 of ITTOIA 2005 allow a caravan site operator to do?

Section 20 allows a caravan site operator who carries on a trade connected with running the site to elect to include letting income and expenses within that trade. This avoids an awkward split between trading income and property income, enabling a single trading profit computation to cover the entire caravan park operation.

What three conditions must be met to use the caravan site trade election under section 20?

The three conditions are: the person must carry on material activities connected with operating the caravan site, those activities must form part of a trade, and the letting receipts and expenses must be ones that would otherwise fall within a property business. When all three are satisfied, the trader may elect to bring letting receipts into the trade.

What happens if the qualifying conditions under section 20 are met for only part of the tax year?

If the qualifying conditions are satisfied for only part of the tax year, the election to include letting receipts and expenses in the trade applies only to the portion of the year during which those conditions were met. Any letting receipts and expenses outside that period remain within the property business rules.

How does section 20 define 'caravan site' and 'letting' for the purposes of this election?

A caravan site means land on which a caravan is stationed for human habitation, together with any adjacent land used in conjunction with it. 'Letting' is given a broad meaning that includes licences to occupy as well as formal tenancy arrangements, ensuring the various commercial arrangements commonly found on caravan sites are all covered.

Income Tax (Trading and Other Income) Act 2005 section 20

Caravan sites where trade carried on

Section 20 allows a caravan site operator who carries on a trade connected with running the site to include letting income and expenses within that trade rather than treating them as part of a separate property business.

Where a trader carries on material activities connected with operating a caravan site as part of a trade, receipts and expenses from letting caravans or pitches that would normally fall within a property business may instead be included in the trading profits calculation.
This is an election available to the trader — they may choose to bring both the letting receipts and expenses into the trade calculation rather than being required to do so.
If the qualifying conditions are met for only part of a tax year, the option to include letting receipts and expenses in the trade applies only to the portion of the year during which those conditions were satisfied.
A "caravan site" means land on which a caravan is stationed for human habitation, together with any land used in conjunction with it, and "letting" includes a licence to occupy.

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member