Income Tax (Trading and Other Income) Act 2005 section 21

Surplus business accommodation

Section 21 allows a trader who temporarily lets out surplus business accommodation to treat the rental income and expenses as part of their trade profits, rather than as a separate property business.

• Where a trader lets out part of a building that is temporarily surplus to requirements, and the remainder of the building is still used for the trade, the rental income and letting expenses may be included in the trade profit calculation instead of being treated as property business income
• The accommodation qualifies as temporarily surplus only if it was used for the trade or acquired within the last three years, the trader intends to use it for the trade again, and the letting is for a term of no more than three years
• The rental income must be relatively small, the accommodation must not be held as trading stock, and the income and expenses would otherwise fall within a property business
• Once this treatment is elected for a particular letting, all subsequent income and expenses from that letting must be dealt with in the same way for as long as the conditions continue to be met

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