Office of Public Sector Information
PART 3 continued CHAPTER 4 continued
(1) This section applies if—
(a) an estate or interest in land is sold subject to terms which provide that it is to be, or may be required to be, reconveyed on a future date to the seller or a person connected with the seller,
(b) the period beginning with the sale and ending with the earliest date on which under the terms of the sale the estate or interest would fall to be reconveyed is 50 years or less, and
(c) the price at which the estate or interest is sold exceeds the price at which it is to be reconveyed.
(2) The seller is treated as—
(a) entering into a transaction mentioned in section 264 (if the land is in the United Kingdom) or section 265 (if the land is outside the United Kingdom), and
(b) receiving the amount calculated under subsection (4) as a result of that transaction.
(3) That amount is brought into account as a receipt in calculating the profits of the property business which consists of or includes that transaction for the tax year in which the estate or interest is sold.
(4) The amount of the receipt is given by the formula—
where—
E is the amount by which the price at which the estate or interest is sold exceeds the price at which it is to be reconveyed, and
Y is the number of complete periods of 12 months (other than the first) comprised in the period beginning with the sale and ending with the earliest date on which under the terms of the sale the estate or interest would fall to be reconveyed.
(5) See section 286 for some provisions which are supplementary to this section.
(1) This section applies if—
(a) an estate or interest in land is sold subject to terms which provide for the grant of a lease directly or indirectly out of the estate or interest to the seller or a person connected with the seller,
(b) the period beginning with the sale and ending with the earliest date on which under the terms of the sale the lease would fall to be granted is 50 years or less, and
(c) the price at which the estate or interest is sold exceeds the total of—
(i) the amount of any premium for the lease, and
(ii) the value on the date of the sale of the right to receive a conveyance of the reversion immediately after the lease begins to run.
(2) This section does not apply if the lease is granted and begins to run within one month after the sale.
(3) The seller is treated as—
(a) entering into a transaction mentioned in section 264 (if the land is in the United Kingdom) or section 265 (if the land is outside the United Kingdom), and
(b) receiving the amount calculated under subsection (5) as a result of that transaction.
(4) That amount is brought into account as a receipt in calculating the profits of the property business which consists of or includes that transaction for the tax year in which the estate or interest is sold.
(5) The amount of the receipt is given by the formula—
where—
E is the amount by which the price at which the estate or interest is sold exceeds the total of—
(a) the amount of any premium for the lease, and
(b) the value on the date of the sale of the right to receive a conveyance of the reversion immediately after the lease begins to run, and
Y is the number of complete periods of 12 months (other than the first) comprised in the period beginning with the sale and ending with the earliest date on which under the terms of the sale the lease would fall to be granted.
(6) See section 286 for some provisions which are supplementary to this section.
(1) This section operates for the purposes of sections 284 (sales with right to reconveyance) and 285 (sale and leaseback transactions).
(2) Subsection (3) explains how to determine for the purposes of section 284 the price at which an estate or interest is to be reconveyed when—
(a) the date on which the estate or interest would fall to be reconveyed is not fixed under the terms of the sale, and
(b) the price at which it is to be reconveyed varies with the date.
(3) The price is taken to be the lowest possible under the terms of the sale.
(4) Subsection (5) explains how to determine for the purposes of section 285 the total of—
(a) the amount of any premium for the lease, and
(b) the value on the date of the sale of the right to receive a conveyance of the reversion immediately after the lease begins to run,
when the date for the grant of the lease is not fixed under the terms of the sale and the total varies with the date.
(5) The total is taken to be the lowest possible under the terms of the sale.
(6) For the purposes of sections 284(3) and 285(4) (receipts of property business for tax year in which estate or interest sold) an estate or interest in land is sold when any of the following occurs—
(a) an unconditional contract for its sale is entered into,
(b) a conditional contract for its sale becomes unconditional, or
(c) an option or right of pre-emption is exercised requiring the seller to enter into an unconditional contract for its sale.
(1) The rule in section 288 (the additional calculation rule) applies in relation to the calculation of receipts under—
section 277 (lease premiums),
section 279 (sums payable instead of rent),
section 280 (sums payable for surrender of lease),
section 281 (sums payable for variation or waiver of term of lease), or
section 282 (assignments for profit of lease granted at undervalue).
(2) It applies if conditions A and B are met.
(3) Condition A is that—
(a) in the case of a receipt under section 277, 279 or 280, the lease is granted out of a taxed lease,
(b) in the case of a receipt under section 281, the lease was granted out of a taxed lease, and
(c) in the case of a receipt under section 282, the assignment is of a taxed lease.
(4) A lease is a “taxed lease” for the purposes of this Chapter if—
(a) there is a receipt under any of sections 277 to 282 in respect of the lease, or
(b) there would be such a receipt, but for the operation of the additional calculation rule in the calculation of its amount.
In this Chapter such a receipt is referred to as a “taxed receipt”.
(5) Condition B is that the taxed receipt, or if there is more than one, at least one of them, has an unused amount.
(6) See section 290 for an explanation of when a taxed receipt has an “unused amount”.
(1) The rule in this section applies if the conditions mentioned in section 287 are met.
(2) The additional calculation rule is that the amount given by the formula in section 277, 279, 280, 281 or 282 must be reduced by the amount calculated in accordance with this section in order to give the amount of the receipt under calculation.
(3) The amount of the reduction is—
(a) if there is one taxed receipt which has an unused amount, the basic relieving amount by reference to that receipt, and
(b) if there is more than one taxed receipt which has an unused amount, the total of the basic relieving amounts by reference to each receipt,
adjusted, if necessary, in the light of section 289(5) (reduction not to exceed amount being reduced).
(4) The basic relieving amount by reference to a taxed receipt is given by the formula—
where—
A is the unreduced amount of the taxed receipt (which is, generally, the amount given by the formula in section 277, 279, 280, 281 or 282, but see section 290(2) to (4)),
LRP is the receipt period of the receipt under calculation, and
TRP is the receipt period of the taxed receipt.
(5) But the basic relieving amount is different if section 289(2) or (4) applies (certain special cases).
(6) For the purposes of this Chapter, the “receipt period” of a receipt is—
(a) in the case of a receipt under section 277 or 280, the effective duration of the lease,
(b) in the case of a receipt under section 279, the period in relation to which the sum payable instead of rent is payable,
(c) in the case of a receipt under section 281, the period for which the variation or waiver has effect, and
(d) in the case of a receipt under section 282, the effective duration of the lease remaining at the date of the assignment.
(1) This section explains how section 288 operates in some special cases.
(2) If—
(a) the receipt under calculation is under any of sections 277 to 281, and
(b) the lease does not extend to the whole of the premises subject to the taxed lease,
the basic relieving amount by reference to a taxed receipt is calculated by multiplying the amount given by the formula in subsection (4) of section 288 by the fraction of those premises which is subject to the lease.
(3) This fraction is calculated on a just and reasonable basis.
(4) If the basic relieving amount given by section 288(4) or subsection (2) above by reference to a taxed receipt would otherwise exceed the unused amount of the taxed receipt, the basic relieving amount is the unused amount.
(5) If the amount of the reduction under section 288 would otherwise exceed the amount given, in respect of the receipt under calculation, by the formula in section 277, 279, 280, 281 or 282, the amount of the reduction is equal to the amount given by the formula.
(1) For the purposes of this Chapter, a taxed receipt has an “unused amount” if the unreduced amount exceeds the total of the reductions and deductions referred to in subsection (5).
(2) In this Chapter the “unreduced amount” of a taxed receipt is the amount given, in respect of the taxed receipt, by the formula in section 277, 279, 280, 281 or 282.
(3) Subsection (4) applies to a taxed receipt under section 277 (lease premiums) as a result of section 278 (amount treated as lease premium where work required).
(4) If the obligation to carry out work included the carrying out of work which gives, or will give, rise to qualifying expenditure under CAA 2001, the unreduced amount of the taxed receipt is calculated as if the obligation had not included the carrying out of that work.
(5) The reductions and deductions mentioned in subsection (1) are—
(a) the reductions under section 288 by reference to the taxed receipt,
(b) the deductions allowed in calculating the profits of a trade, profession or vocation for expenses under section 61 (tenant under taxed lease who uses land in connection with trade treated as incurring expenses) by reference to the taxed receipt, and
(c) the deductions allowed in calculating the profits of a property business for expenses under section 292 (tenant under taxed lease who uses premises for purposes of property business treated as incurring expenses) by reference to the taxed receipt.
(6) For the purposes of this Chapter references to a reduction under section 288 by reference to a taxed receipt are to a reduction under that section so far as attributable to the taxed receipt.
(1) Section 292 (tenants under taxed leases treated as incurring expenses) applies in calculating the profits of a property business carried on by the tenant under a taxed lease for the purpose of making deductions for the expenses of the property business.
(2) A deduction is allowed for an expense under section 292 for a qualifying day on which the whole or part of the premises subject to the taxed lease is—
(a) occupied by the tenant for the purpose of carrying on the property business, or
(b) sublet.
(3) But any deduction for an expense under section 292 is subject to the application of any provision of Chapter 4 of Part 2 (as applied to property businesses by section 272).
(4) The amount of the deduction for an expense under section 292 for a qualifying day by reference to a taxed receipt may be reduced in order to comply with section 295 (limit on reductions and deductions).
(5) For the meaning of expressions used in this section, see in particular—
section 287(4) (“taxed lease”), and
section 287(4) (“taxed receipt”).
(1) The tenant under a taxed lease is treated as incurring an expense of a revenue nature in respect of the premises subject to the taxed lease for each qualifying day.
(2) If there is more than one taxed receipt, this section applies separately in relation to each of them.
(3) A day is a “qualifying day”, in relation to a taxed receipt, if it falls within the receipt period of the taxed receipt.
(4) The amount of the expense for the qualifying day by reference to the taxed receipt is given by the formula—
where—
A is the unreduced amount of the taxed receipt, and
TRP is the number of days in the receipt period of the taxed receipt.
(5) This section is subject to sections 293 and 294 (restrictions on expenses where the additional calculation rule is relevant).
(6) For the meaning of expressions used in this section, see in particular—
section 288(6) (“receipt period”), and
section 290(2) to (4) (“unreduced amount”).
(1) This section applies if, in calculating the amount of a receipt (“the lease premium receipt”), there is a reduction under section 288 (the additional calculation rule) by reference to the taxed receipt.
(2) Subsections (3) to (5) provide for the application of section 292 for a qualifying day that falls within the receipt period of the lease premium receipt.
(3) The tenant under the taxed lease is treated as incurring an expense under section 292 for the qualifying day by reference to the taxed receipt only if the daily amount of the taxed receipt exceeds the daily reduction of the lease premium receipt.
(4) If the condition in subsection (3) is met, the amount of the expense under section 292 for the qualifying day by reference to the taxed receipt is equal to that excess.
(5) If the qualifying day falls within the receipt periods of more than one lease premium receipt, the reference in subsection (3) to the daily reduction of the lease premium receipt is to be read as a reference to the total of the daily reductions of each of the lease premium receipts whose receipt period includes the qualifying day.
(6) In this section—
the “daily amount” of the taxed receipt is given by the formula—
where—
A is the unreduced amount of the taxed receipt (see section 290(2) to (4)), and
TRP is the number of days in the receipt period of the taxed receipt, and
the “daily reduction” of a lease premium receipt is given by the formula—
where—
AR is the reduction under section 288 by reference to the taxed receipt (see section 290(6)), and
RRP is the number of days in the receipt period of the lease premium receipt.
(7) Section 294 explains how this section operates if the lease premium receipt is in respect of a lease that has been granted out of the taxed lease and does not extend to the whole of the premises subject to the taxed lease.
(1) This section applies if—
(a) a lease has been granted out of the taxed lease,
(b) the lease does not extend to the whole of the premises subject to the taxed lease, and
(c) in calculating the amount of a receipt under any of sections 277 to 281 (receipts in respect of lease premiums or sums payable instead of rent, for surrender of lease or for variation or waiver of term of lease) in respect of the lease (“the lease premium receipt”), there is a reduction under section 288 by reference to the taxed receipt.
(2) Subsections (3) to (5) apply for a qualifying day that falls within the receipt period of the lease premium receipt.
(3) Sections 292 and 293 apply separately in relation to the part of the premises subject to the lease and to the remainder of the premises.
(4) If—
(a) more than one lease that does not extend to the whole of the premises subject to the taxed lease has been granted out of the taxed lease, and
(b) the qualifying day falls within the receipt period of two or more lease premium receipts that relate to different leases,
sections 292 and 293 apply separately in relation to each part of the premises subject to a lease to which such a receipt relates and to the remainder of the premises.
(5) Where sections 292 and 293 apply in relation to a part of the premises, A becomes the amount calculated by multiplying the unreduced amount of the taxed receipt by the fraction of the premises constituted by the part.
(6) This fraction is calculated on a just and reasonable basis.
(1) The total of—
(a) the reductions under section 288 by reference to a taxed receipt, and
(b) the deductions allowed in calculating the profits of a property business for expenses under section 292 (tenant under taxed lease who uses premises for purposes of property business treated as incurring expenses) by reference to the taxed receipt,
must not exceed the amount referred to in subsection (2).
(2) The amount mentioned in subsection (1) is the difference between—
(a) the unreduced amount of the taxed receipt, and
(b) the deductions allowed in calculating the profits of a trade, profession or vocation for expenses under section 61 (tenant under taxed lease who uses land in connection with trade treated as incurring expenses) by reference to the taxed receipt.
(1) This section applies if in respect of a lease—
(a) there is a receipt of a Schedule A business or an overseas property business (within the meaning of section 70A(4) of ICTA) as a result of section 34 or 35 of ICTA (treatment of premiums etc. as rent and assignments for profit of lease granted at an undervalue) for an accounting period ending after 5th April 2005, or
(b) there would be such a receipt, but for the operation of section 37(2) or (3) of ICTA (reductions in certain receipts under section 34 or 35 of ICTA).
In this Chapter such a receipt is referred to as a “corporation tax receipt”.
(2) For the purposes of this Chapter—
(a) the lease is treated as a taxed lease, and
(b) the corporation tax receipt is treated as a taxed receipt.
(3) For the purposes of this Chapter, the “receipt period” of a taxed receipt which is a corporation tax receipt is—
(a) in the case of a corporation tax receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and
(b) in the case of a corporation tax receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.
(4) For the purposes of this Chapter the “unreduced amount” of a taxed receipt which is a corporation tax receipt is the amount of the corporation tax receipt as a result of section 34 or 35 of ICTA, before the operation of section 37(2) or (3) of ICTA.
(5) Subsection (6) applies to a taxed receipt which is a corporation tax receipt arising as a result of section 34(2) of ICTA (obligation on tenant to carry out work under lease).
(6) If the obligation to carry out work includes the carrying out of work which gives, or will give, rise to qualifying expenditure under CAA 2001, the unreduced amount of the taxed receipt is calculated as if the obligation had not included the carrying out of that work.
(1) This section applies if—
(a) in calculating the amount of a corporation tax receipt, there is a reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest for the purposes of that section, and
(b) the amount chargeable on the superior interest is the taxed receipt for the purposes of this Chapter.
(2) For the purposes of this Chapter references to a reduction under section 37(2) or (3) of ICTA in a corporation tax receipt by reference to the amount chargeable on the superior interest are to the difference between—
(a) the amount of the corporation tax receipt before the operation of section 37(2) or (3) of ICTA, and
(b) the amount of the receipt after the operation of that subsection,
so far as attributable to the amount chargeable on the superior interest for the purposes of section 37 of ICTA.
(3) In sections 290(5)(a) (meaning of “unused amount”) and 295(1)(a) (limit on reductions and deductions) references to reductions under section 288 by reference to the taxed receipt include references to reductions under section 37(2) or (3) of ICTA in corporation tax receipts by reference to the amount chargeable on the superior interest.
(4) Sections 292 to 294 apply as follows—
(a) the corporation tax receipt is treated as if it were a lease premium receipt for the purposes of sections 293 and 294,
(b) references in those sections to the reduction under section 288 by reference to the taxed receipt are, in relation to the corporation tax receipt, to the reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest, and
(c) for the purposes of those sections the receipt period of the corporation tax receipt is—
(i) in the case of a corporation tax receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and
(ii) in the case of a corporation tax receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.
(1) Subsection (2) applies if—
(a) in calculating the profits of a trade, profession or vocation for an accounting period ending after 5th April 2005, a company is treated as paying rent under section 87(2) of ICTA by reference to the amount chargeable for the purposes of that section, and
(b) the amount chargeable is the taxed receipt for the purposes of this Chapter.
(2) References in sections 290(5)(b) and 295(2)(b) to the deductions allowed for expenses under section 61 by reference to the taxed receipt include references to the deductions allowed in calculating the profits of the trade, profession or vocation for the rent that the company is treated as paying under section 87(2) of ICTA by reference to the amount chargeable.
(3) Subsection (4) applies if—
(a) in calculating the profits of a Schedule A business or an overseas property business (within the meaning of section 70A(4) of ICTA) for an accounting period ending after 5th April 2005, a company is treated as paying rent as a result of section 37(4) of ICTA by reference to the amount chargeable on the superior interest for the purposes of that section, and
(b) the amount chargeable on the superior interest is the taxed receipt for the purposes of this Chapter.
(4) References in sections 290(5)(c) and 295(1)(b) to the deductions allowed for expenses under section 292 by reference to the taxed receipt include references to the deductions allowed in calculating the profits of the Schedule A business or overseas property business (within the meaning of section 70A(4) of ICTA) for the rent that the company is treated as paying as a result of section 37(4) of ICTA by reference to the amount chargeable on the superior interest.
(1) This section applies if—
(a) there is a receipt under section 277 (lease premiums) in respect of a premium which is payable by instalments, or
(b) there is a receipt under any of sections 279 to 281 (sums payable instead of rent, for surrender of lease or for variation or waiver of term of lease) in respect of a sum which is payable by instalments.
(2) The person who is liable to pay tax by reference to the receipt may choose to pay the tax by such instalments as the Inland Revenue may allow.
(3) The period over which the instalments of tax must be paid—
(a) must be 8 years or less, and
(b) must end before, or at the same time as, the time when the last of the instalments mentioned in subsection (1)(a) or (b) is payable.
(1) This section applies if any of the persons mentioned in subsection (3) provides the Inland Revenue with a statement showing—
(a) whether or not there is, or may be, a receipt under section 282 (assignments for profit of lease granted at undervalue), and
(b) the amount of any receipt.
(2) The Inland Revenue must certify the accuracy of the statement, if satisfied as to its accuracy.
(3) The persons referred to in subsection (1) are—
(a) the landlord who granted the lease,
(b) a person who assigned it, or
(c) a person to whom it was assigned.
(1) This section applies if—
(a) there is a receipt under section 284 (sales with right to reconveyance), and
(b) the date on which the estate or interest would fall to be reconveyed was not fixed under the terms of the sale.
(2) If the seller makes a claim, the seller must be repaid the amount by which A exceeds B, where—
A is the amount of tax paid by the seller which was payable by virtue of section 284, and
B is the amount of tax that would have been so payable if the date on which the estate or interest was reconveyed had been taken as the date fixed by the terms of the sale.
(3) The claim must be made within 6 years after the day on which the estate or interest was reconveyed.
(1) This section applies if—
(a) there is a receipt under section 285 (sale and leaseback transactions), and
(b) the date for the grant of the lease was not fixed under the terms of the sale.
(2) If the seller makes a claim, the seller must be repaid the amount by which A exceeds B, where—
A is the amount of tax paid by the seller which was payable by virtue of section 285, and
B is the amount of tax that would have been so payable if the date on which the lease was granted had been taken as the date fixed by the terms of the sale.
(3) The claim must be made within 6 years after the day on which the lease was granted.
Income Tax (Trading and Other Income) Act 2005