What does section 63 of ITTOIA 2005 do for non-occupying tenants?

Section 63 extends expense relief to tenants who do not physically occupy leased property but use their leasehold interest as an asset employed for the purposes of their trade. For example, a trader who sublets premises to a retailer selling exclusively that trader's goods is treated as if they occupied the land for trade purposes, enabling them to claim deductions under section 61.

How does section 63 prevent double relief for tenants who sublet?

Section 63 prevents double relief by ensuring that for any particular day, a tenant cannot claim an expense deduction under both section 63 for trade purposes and section 292 for a property business. If the tenant has already been treated as incurring an expense under section 292 for a given day, that day's expense cannot also be claimed under section 63.

What is a typical example of section 63 applying to a trader?

A typical example is a trader who holds a lease on premises and sublets them to a retailer who exclusively sells goods supplied by that trader. Although the trader does not occupy the premises, the lease is employed for the purposes of the trader's business, so section 63 treats the trader as if they occupied the property for trade purposes.

Are there further restrictions on relief under section 63 of ITTOIA 2005?

Yes. Even where section 63 applies, the amount of relief may be further limited by sections 64 and 65. These sections impose restrictions where the additional calculation rule is relevant, such as where the tenant has received a lease premium themselves or where only part of the premises is involved, ensuring relief reflects the tenant's actual economic position.

Income Tax (Trading and Other Income) Act 2005 section 63

Tenants dealing with land as property employed for purposes of trade

Section 63 provides tax relief for tenants who do not physically occupy leased property but instead use their interest in it as an asset employed for the purposes of their trade.

This section applies where a tenant under a taxed lease does not occupy the property but treats the lease as an asset used in carrying on a trade — for example, a trader who sublets premises to a tenant who sells only that trader's goods
The tenant is treated as if they occupied the land for trade purposes, which means the expense relief available under section 61 applies to them in the same way as it would to a tenant who physically occupies the premises
However, to prevent double relief, the tenant cannot claim an expense deduction under this section for any day on which they have already been treated as incurring an expense under section 292 when calculating the profits of their property business
Any expense relief arising under this section is also subject to the additional restrictions set out in sections 64 and 65, which limit section 61 expenses where the additional calculation rule is relevant

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