| Income
from property is classed by the Inland Revenue
as investment (unearned) income and since 6 April
1995 is taxed under Schedule "A"
instead of the previous Schedule "D"
Case VI.
Company income from
property was largely brought into line with
Schedule "A" Income Tax rules 1 April
1998.
Under Schedule "A"
rules income tax is charged on the profits of a
business of letting property, including isolated
or casual lettings.
However, even though income
from property is calculated using business
trading tax rules, this does not mean it will be
taxed as trading income - it is taxed as
investment income derived from the capital
invested (unearned income).
Under Schedule "A" all
your income from UK property is pooled
together regardless of the type of lease or whether
the property is furnished of not furnished and
includes income not derived from a lease.
Capital
Allowances (commercial property) are given as a
Schedule "A" expense, as part of the
property income calculation.
As capital allowances are not
available for plant and machinery in a furnished
residential property, tax allowances follow
rules on the Renewals
Basis or Wear and
Tear Allowance
All losses brought
forward from previous years can be set off
against future income from the business.
Interest payable on
loans in respect of a Schedule "A"
business will be allowed as a deduction in
calculating profits under the same rules applying
for other Deductible
Expenses
Income
from abroad from property outside the UK
is treated on a similar basis to that for UK
property. Interest payable on loans taken out to
purchase foreign property is also allowable as an
expense against the property income.
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