Explanatory note

Section 312 of the Income Tax (Trading and Other Income) Act 2005 (c. 5) provides that the Treasury may make regulations to specify other descriptions of energy-saving items in respect of which expenditure may be deducted by residential landlords when calculating the profits of their property business. Section 314 further provides that the Treasury may make regulations providing for the apportionment and restriction of the amount of such a deduction. These Regulations exercise the powers contained in those sections.

Regulation 1 deals with citation, commencement and interpretation.

Regulation 2 specifies that hot water system insulation, draught proofing, solid wall insulation and floor insulation are to be classed as items of an energy-saving nature.

Regulation 3 restricts the maximum amount of expenditure for which a deduction is allowed to £1,500 per property (dwelling-house) per tax year.

Regulation 4 provides for a just and reasonable apportionment of the allowable deduction where two or more people each own or have interests in the property in question. This regulation also deals with contributions to expenditure, and provides an appeal mechanism in cases where there is a dispute.

Regulation 5 revokes previous Regulations which have dealt with the treatment of items of an energy-saving nature.

A full regulatory impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.