Finance Act 1995

5(1)Section 26 of that Act (land managed as one estate), except where it is applied for the purposes of corporation tax, shall have effect with the following modifications.

(2)Subsection (1) shall have effect as if—

(a)in paragraph (a), the words “at a full rent (not being a tenant’s repairing lease)” were omitted; and

(b)for the words from “not being” in paragraph (b) to the end of the subsection there were substituted “as if the rent, so far as it relates to that part and would otherwise be treated as being at a lower rate, were at a rate per annum equal to the relevant annual value.”

(3)Subsection (2) shall have effect as if paragraph (a) were omitted.

(4)The following subsection shall be deemed to be inserted after subsection (2)—

“(2A)Where subsection (1) above applies, the following rules shall apply in computing the profits or gains on which the owner is charged under Schedule A—

(a)disbursements and expenses relating to any of that part of the estate which comprises land the rent in respect of which is determined under that subsection (“the relevant part of the estate”) shall not be deductible from any receipts which are not so determined except to the extent that—

(i)the amount of the disbursements and expenses exceeds the amount of the rent so determined; and

(ii)the receipts against which the remainder is set are receipts in respect of land comprised in the estate;

(b)any excess for any chargeable period of the disbursements and expenses relating to the relevant part of the estate (including any excess carried forward under this paragraph) over the receipts for that period from which they are deductible in accordance with paragraph (a) above—

(i)shall be disregarded in computing any loss in respect of which relief may be given under section 379A, but

(ii)may be carried forward to the following chargeable period and treated in relation to the later period as if it were a disbursement or expense relating to the relevant part of the estate;

(c)disbursements and expenses relating to any land not comprised in the relevant part of the estate shall be deductible from the deemed receipts in respect of the land which is so comprised to the extent only that the deemed receipts exceed the aggregate of—

(i)the actual disbursements and expenses for that period relating to the relevant part of the estate, and

(ii)any amounts carried forward to that period under paragraph (b) above;

and

(d)any excess of the disbursements and expenses for that period relating to land not comprised in the relevant part of the estate over the amounts from which they are deductible shall be treated for the purposes of section 379A as a loss for that period in the Schedule A business in question.”