Annex 1: Minor changes in the law made by the Act: Change 5: Rents in respect of wayleaves where associated with a trade: sections 22 and 344
This change shifts the charge on rents from certain wayleaves associated with a trade from Schedule D Case V and Case VI to a charge on trade profits.
Section 120 of ICTA makes provision about rent payable in respect of “any easement enjoyed in the United Kingdom in connection with any electric, telegraphic or telephonic wire or cable” other than an easement of a kind mentioned in section 119(1) of ICTA. Section 119 of ICTA applies to certain easements which are or might be used or enjoyed in connection with any of the concerns listed in section 55 of ICTA. Those concerns include mines, quarries, certain industrial concerns, canals, docks, markets, bridges, ferries, and railways. “Rent” and “easement” both have wide meanings for this purpose (see section 119(3) of ICTA).
Section 120(1) of ICTA provides for the rent from electric-line easements to be charged under Schedule D unless other income from the land to which the easement relates is charged under Schedule A. In that case the rent is charged to tax under Schedule A, section 120(1A) of ICTA.
Section 120(1) of ICTA does not specify under which Case of Schedule D the rent is to be charged. In practice, where the easement relates to land on which a person carries on a trade, the rent is charged under Case I of Schedule D and, in other cases, under Case VI. In the absence of section 120 of ICTA the rent would be charged to tax under Schedule A. Section 120 of ICTA does not apply to rent from easements relating to land outside the United Kingdom, which is charged to tax under Schedule D Case V.
Section 120(1) of ICTA as it applies to trades is rewritten in section 22. Under section 22:
	the word “easement” is rewritten as “wayleave”. The rest of this note refers to wayleaves;
	rents from wayleaves related to land associated with a trade will be charged to income tax under Part 2 of this Act (as profits of the trade) if the taxpayer so chooses and has no other income from the land in question; and
	all other rents from wayleaves will be charged to income tax under Part 3 of this Act (property income).
This enacts the existing non-statutory practice for easements to which section 120 of ICTA applies which are associated with a trade but represents a change both in practice and in the law as respects:
	wayleaves other than those connected with “electric, telegraphic or telephonic wire or cable”;
	wayleaves relating to land outside the United Kingdom; and
	wayleaves of a kind mentioned in section 119(1) of ICTA.
Section 22 applies the same treatment to land occupied for the purposes of a profession or vocation. It also makes clear that any expenses incurred in respect of the wayleave can also be allowed as deductions in calculating the profits.
Section 119(1) of ICTA is rewritten as Chapter 8 of Part 3 of this Act. Under the law as it applies before the commencement of this Act, rent in respect of a wayleave that meets the conditions in both sections 119(1) and 120(1) of ICTA is taxed under section 119 of ICTA. Section 262(2) of this Act reverses that order of priority. This is necessary to allow the taxpayer to have such rent taxed as the profits of a trade. It will not prevent a claim for relief under section 340 of this Act as rent for an electric-line wayleave would not qualify for such relief.
All rents that are in practice charged to tax under Schedule D Case VI by virtue of section 120(1) of ICTA, as that section applies before the commencement of this Act, will be charged under section 344 (charge to tax on rent receivable for a UK electric-line wayleave).
This change is in taxpayers' favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small.