PIM2076 - Deductions: main types of expense: cost of providing services
Source: gov.uk (2025-07-25)


As well as renting a property to a tenant a landlord may also provide additional services. They can claim the cost of providing those services as an allowable deduction of their property business provided the receipts they earn from them are also included as part of their property business income, see the examples below.Exceptionally the provision of services can amount to a trade distinct from the property business. Here neither the income nor the expenditure relating to these services will be included in the property business. See the example of Clare below.

Landlords who provide energy to tenants which has been generated from energy-efficient sources (heat pumps, biomass boilers, etc) may receive Renewable Heat Incentive (RHI) or Feed In Tariff (FIT) payments. These payments should be treated as a reduction in the cost of providing heat. If the payments exceed the cost, the excess may be treated as property income - see PIM4300 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4300#).

Example of property business services

Sital lets out a furnished house. She charges £800 rent each calendar month. Under the terms of the agreement Sital is responsible for cleaning the house and for maintaining the garden. She pays a cleaning agency and a gardener a total of £100 a month for 16 hours general housework and 12 hours gardening every month.Here the full £9,600 annual rent is assessable as a property business receipt and the £1,200 for cleaning and gardening is allowable as a deduction in computing the assessable profits of the property business. The cleaning and gardening does not amount to a distinct trade; they are just ordinary incidents of the property business.

Example of separate trade of providing services

Clare lets out five furnished flats to tenants on three-year leases. The flats are all in the same building and the lease agreements charge an annual rent for each flat. In addition, she makes a separate charge dependent on the size of the flat to cover the provision of the following services: electricity, gas, hot water and central heating to each flat; the provision of linen and laundry facilities in the basement; weekly cleaning of each flat and of common parts; 24-hour reception and porter facilities and general maintenance of all machinery provided in each flat.The provision of these extra services (but not the provision of the flats themselves) is agreed with HMRC to amount to a trade. Thus Clare will only include in her property business the rental income she receives. The separate charge for services is excluded and so are the costs of those services. The service charge and service expenses will be charged to tax using the rules for trades.

Property business isn’t usually a trade

It is unusual for a letting activity to amount to a trade except in the case of a hotel, guest house or similar activity where meals, cleaning, changes of linen etc. are provided. Where there is a trade, the earnings from guests and the cost of providing the services (meals, cleaning etc.) are all included in the computation of the trading profits of that hotel, or similar. The costs are not then allowable as a deduction against property business income. There is more guidance on this subject at PIM4300 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4300).