ACCA ATX ^UK Syllabus A4. Corporation Tax - Property business profits/losses - for Companies - Notes ^{4 / 14}

The calculation of property business profits is exactly the same as that for individuals with 4 exceptions:

• 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 100% restriction to interest expenses that we saw in the income tax topic does not apply to companies.

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

• Property losses for a company are entirely relieved against Total Income of the:
   
  1) current year or
  2) carried forward to future years.

  Note:
  Property losses CANNOT be carried back 12 months. ONLY Trading losses CAN

  Qualifying charitable donations (QCD) CANNOT be saved!

  LOSS must be deducted first and if any income remains - then the QCD can be deducted

• Property income is calculated using the accruals basis for companies, not the cash basis.

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:

What will Theta Ltd. taxable total profits be?

Solution:

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.