Annex 1: Minor changes in the law made by the Act: Change 4: Surplus business accommodation: section 21
This change gives statutory effect to the Inland Revenue practice on receipts from surplus business accommodation known as Revenue Decision 9.
The case of Salisbury House Estate Ltd v Fry (1930), 15 TC 266 HL is authority for the proposition that the income tax Schedules are mutually exclusive so any amount received by a trader from the letting of premises surplus to the requirements of the trade should not be taken into account in calculating the profits of the trade but assessed separately to tax as income from property under Schedule A. Similarly, any outgoings in respect of the premises should be apportioned between the part which is let and the part used for the purposes of the trade.
In practice, the Inland Revenue does not object to a trader including receipts from letting surplus business accommodation in trade receipts provided certain conditions are met. This practice, published in the February 1994 edition of Tax Bulletin under the heading “Revenue Decisions - Schedule D Cases I and II – Letting Surplus Business Accommodation”, is referred to in some in some reference books as Revenue Decision 9. The practice extends to trades within Schedule D Case V.
The conditions in Revenue Decision 9 are:
	the accommodation is temporarily surplus to the current requirements of the trade;
	part of the accommodation is used for trade purposes;
	the rental income is comparatively small; and
	the rent is in respect of the letting of surplus business accommodation only - not surplus land.
In legislating the conditions in Revenue Decision 9, section 21 sets out rules for determining whether accommodation is temporarily surplus to requirements. These are:
	that the accommodation must have been used for the purposes of the trade within the last three years (or acquired within that period);
	that the accommodation must be let for a term of not more than three years; and
	that the trader must intend to use the accommodation for trade purposes at a later date.
This gives taxpayers increased certainty as to whether the condition is met.
This change is in taxpayers' favour in principle. But it is expected to have no practical effect as it is in line with current practice.