CT600 for an Investment Company: Property, Dividends and Share Gains

A company that holds rental property and a portfolio of shares has several different kinds of income, and the CT600 keeps them strictly apart. Lumping them together is the single most common mistake, because each stream has its own box and its own rules about what it can be offset against. Here is where each one goes.

The boxes that matter

Rental income is not turnover

Rent from UK property is taxed as a UK property business, not as trading income, and it goes in box 190 rather than into turnover. Letting costs (agent fees, repairs, insurance, loan interest) are deducted in arriving at that figure. If the letting makes a loss, the loss can generally be set against the company's total profits for the same period, which makes property losses more flexible than trading losses.

One caveat that catches people: losses left over from before 6 April 2020, when companies paid Income Tax on property income, can only reduce property profits and must be used first.

Dividends are exempt but not irrelevant

Dividends a company receives from other companies are exempt from Corporation Tax under Part 9A of the Corporation Tax Act 2009. No tax is charged on them, which is why they never appear in taxable profits.

They still change your bill, though. Section 279G of the Corporation Tax Act 2010 adds exempt distributions to taxable profits to give augmented profits, and augmented profits are what decide whether you pay 19%, 25%, or marginal relief in between. A company with £40,000 of profit and a £30,000 dividend is a marginal relief company, not a small profits one, even though the dividend itself is untaxed. Box 620 is where the figure is reported.

Selling property or shares is a chargeable gain

A disposal at a profit is a chargeable gain, added to taxable profits and charged at normal Corporation Tax rates. Boxes 210 to 220 cover the gross gain, the allowable losses set against it, and the net figure.

Two things make the calculation harder than it looks. Indexation allowance is available for assets held before January 2018, but only up to December 2017 when it was frozen. And for shares, the share identification and pooling rules decide which shares you are treated as having sold when you bought the same holding at different prices over time. Getting that wrong changes the gain.

Management expenses: the deduction people miss

A company with an investment business can deduct the expenses of managing those investments from its total profits, under section 1219 of the Corporation Tax Act 2009. This is not the same as a trading expense and not the same as a letting cost. It goes in box 245, and any amount you cannot use carries forward as excess management expenses in box 850.

Three conditions are worth knowing:

• The deduction is taken before any other deduction at Step 2 of the calculation (s.1219(1A)), so it comes ahead of trading and property loss relief.
• Expenses of a capital nature never qualify (s.1219(3)(a)).
• A cost cannot be counted twice. If it is already deductible in calculating a component of total profits (letting costs netted against rent, for example) it cannot also be a management expense (s.1219(3)(b)). Where a cost is genuinely mixed, it is apportioned on a just and reasonable basis.

The practical significance is the carry forward. Excess management expenses carry forward against future total profits, whereas a trading loss carried forward can only meet future trading profits. For a company with no trade, that difference decides whether relief is usable at all.

A note on our own software. SimpleCompanyTax does not currently complete boxes 245 or 850. Rental income, dividends received and chargeable gains are all supported, but if your company has genuine expenses of managing an investment business, please contact us before filing so we can check the treatment with you rather than have the figure land in the wrong place.

The accounts side: cost, not market value

The CT600 is only half the filing. Your accounts have to show the property and the shares too, and the accounting standard constrains how.

Under FRS 105, the micro-entity standard, everything is carried at historical cost. Investment property is cost less depreciation and impairment, and investments are cost less impairment. There is no option to revalue or to use fair value. Under FRS 102 Section 1A, by contrast, investment property is carried at fair value with changes going through profit or loss.

This is the most common reason a property or investment company chooses FRS 102 over FRS 105, and it is worth deciding before you prepare anything, because it changes the figures rather than just their presentation.

Who cannot use the micro-entity regime

Even within the size limits (two of: turnover £632,000 or less, balance sheet total £316,000 or less, 10 employees or fewer), some companies are excluded from the micro-entity regime by law, including investment undertakings and financial holding companies. That definition is narrow and aimed at collective investment vehicles rather than an ordinary company holding some shares. Note also that a company owning property outright frequently exceeds the balance sheet limit, which is the first thing to check.

This article is general guidance, not tax advice. Investment company computations can involve real judgement, and the amounts are often large enough to justify professional advice.