Step by step guide on calculation rental profits(Case V)
Less rental expenses
Net rental income
Less: Capital allowances
Less: Case V losses carried forward
A separate computation (gross rent less rental expenses) is required for each letting.
Section 97 TCA 1997 provides that the following costs are deductible in the calculation of rental profits provided always that such costs are revenue rather than capital in nature:
(a) rent payable by the landlord in respect of the property being let,
(b) rates levied by a local authority in respect of the property being let,
(c) costs that the landlord is obliged to incur under the lease,
(d) maintenance, repairs, insurance and management of the premises being let and
(e) interest on borrowings used for the purchase, improvement or repair of the premises.
Once the aggregated surplus or deficiency has been identified, the deduction of capital allowances is the next step in the Case V calculation
Case V losses carried forward
A loss incurred in respect of a Case V letting can be carried forward indefinitely for use in future years.