ATXP6 UK
Syllabus A4. Corporation Tax A4a. Taxable total profits

A4a. Property business profits and relief for property losses

Syllabus A4a)

E2 Taxable total profits

Compute property business profits

The calculation of property business profits is exactly the same as that for individuals with 3 exceptions:

  1. Interest payable on a loan to buy an investment property is deducted from “Interest income” under the loan relationship rules as opposed to “property business profits”. 

    The 50% restriction to interest expenses that we saw in the income tax topic does not apply to companies.

  2. There is no rent a room relief for companies as a company will not have a main residence.

  3. Property losses for a company are entirely relieved against total taxable profits of the current year or carried forward to future years before any qualifying charitable donations can be deducted. 

    This treatment continues for future years.

Please refer to Topics: Computation of property business profits, Furnished holiday lettings, rent a room relief, premiums granted for short leases, property business loss relief to review how property business profits are calculated.

Illustration:

For the year ended 31/03/2018 Theta Ltd. has:
Trading income  £100,000 
Property loss (£20,000)
Qualifying charitable donation  £85,000

What will Theta Ltd. taxable total profits be?

Solution:

Trading income £100,000
Property loss (£20,000)
Net income £80,000
Qualifying charitable donation  (£80,000)
Taxable total profit Nil 

Note that the property loss is relieved before the qualifying charitable donation against total income.

Additionally, this has resulted in £5,000 of the qualifying charitable donation being wasted.