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Farmer letting out barns - rent or trade income?

Farmer lets out barns not currently used in farm business - rental or trading income?

A farming client who is currently making loss from his farming activities has now started to let out barns in the yard behind the farm house.  I am unsure whether the income arising should be treated as part of his farming income, or should be declared separately as rental income.

The rental income will be relatively modest, perhaps £5,000 - £6,000 a year and if treated as part of the trading income it is likely that the income will be covered by the loss made by the farm. 

The farming losses are no longer able to be offset against total income so this does seem a rather artificial way of avoiding paying tax on the rental income which would be the case if the rents were declared separately.

It does appear however that the BIM may allow the income to be treated as part of the trading income, albeit that the "temporarily surplus to requirements" conditions may be somewhat questionable.

Thanks for any thoughts.


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14th Mar 2018 12:52

What was barn used for before, what will it be used for after?

Is barn part of a building the other part used in trade?

Is rent relatively small re the farming business?

Surplus business accommodation

(1)This section applies if—
(a)a person (“the trader”) carrying on a trade obtains receipts from a letting of business accommodation that is temporarily surplus to requirements (see subsections (3) and (4)),
(b)the accommodation is not held as trading stock,
(c)the receipts are in respect of part of a building of which another part is used to carry on the trade,
(d)the receipts are relatively small, and
(e)the receipts, and the expenses of the letting, would otherwise be brought into account in calculating the profits of a property business of the trader.
(2)The trader may instead bring both the receipts and expenses into account in calculating the profits of the trade.
(3)Accommodation is temporarily surplus to requirements only if—
(a)it has been used within the last 3 years to carry on the trade or acquired within the last 3 years,
(b)the trader intends to use it to carry on the trade at a later date, and
(c)the letting is for a term of not more than 3 years.

Thanks (1)
14th Mar 2018 13:03

A barn is a ''farm building used for storing grain, hay or straw or for housing livestock'' or is it now something else?

Thanks (0)
14th Mar 2018 14:12

But a barn may be used for many things, storing classic cars, storage of a boat. The key is was it used within the farming business before being let and will it be used within the farming business after it is let?

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