Income and Corporation Taxes Act 1988

36 [F1 Charge] on sale of land with right to reconveyance. U.K.

(1) M1 Where the terms subject to which an estate or interest in land is sold provide that it shall be, or may be required to be, reconveyed at a future date to the vendor or a person connected with [F2 the vendor], [F3 the following amount shall be deemed to have been received as income by the vendor and to have been received by [F2 the vendor] in consequence of [F4 the vendor's] having entered into a transaction falling to be treated as mentioned in paragraph 1(2) of Schedule A, that is to say] any amount by which the price at which the estate or interest is sold exceeds the price at which it is to be reconveyed or, if the earliest date at which in accordance with those terms it would fall to be reconveyed is a date two years or more after the sale, [F5 the amount of the excess] reduced by one-fiftieth thereof for each complete year (other than the first) in the period between the sale and that date.

(2) Where, under the terms of the sale, the date of the reconveyance is not fixed, then—

(a) if the price on reconveyance varies with the date, the price shall be taken, for the purposes of this section, to be the lowest possible under the terms of the sale, and

(b) there shall be repaid to the vendor, on a claim made before the expiry of six years after the reconveyance takes place, any amount by which [F6 corporation tax] assessed on [F7 the vendor] by virtue of this section exceeded the amount which would have been so assessed if that date had been treated for the purposes of this section as the date fixed by the terms of the sale.

(3) M2 Where the terms of the sale provide for the grant of a lease directly or indirectly out of the estate or interest to the vendor or a person connected with [F8 the vendor], this section shall, subject to subsection (4) below, apply as if the grant of the lease were a reconveyance of the estate or interest at a price equal to the sum of the amount of the premium (if any) for the lease and the value at the date of the sale of the right to receive a conveyance of the reversion immediately after the lease begins to run.

(4) Subsection (3) above shall not apply in any case where the lease is granted and begins to run within one month after the sale.

[F9 (4A) An amount deemed under this section to have been received as income by the vendor—

(a) is treated as received when the estate or interest is sold, and

(b) shall be taken into account in computing the profits of the Schedule A business in question for the [F10 accounting] period in which it is treated as received.

(4B) For the purposes of subsection (4A)(a) an estate or interest in land is treated as 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 vendor to enter into an unconditional contract for its sale.]

(5) M3 In this section references to a person connected with another shall be construed in accordance with section 839.

Textual Amendments

F1 S. 36: word in sidenote substituted (with effect as mentioned in s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(1), Sch. 5 para. 17(2) (with Sch. 5 para. 73)

F2 Words in s. 36(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 19(2)(a) (with Sch. 2)

F3 Words in s. 36(1) substituted (with effect as mentioned in s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(1), Sch. 5 para. 17(3)(a) (with Sch. 5 para. 73)

F4 Words in s. 36(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 19(2)(b) (with Sch. 2)

F5 Words in s. 36(1) substituted (with effect as mentioned in s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(1), Sch. 5 para. 17(3)(b) (with Sch. 5 para. 73)

F6 Words in s. 36(2)(b) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 19(3)(a) (with Sch. 2)

F7 Words in s. 36(2)(b) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 19(3)(b) (with Sch. 2)

F8 Words in s. 36(3) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 19(4) (with Sch. 2)

F9 S. 36(4A)(4B) inserted (with effect as mentioned in s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(1), Sch. 5 para. 17(4) (with Sch. 5 para. 73)

F10 Words in s. 36(4A)(b) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 19(5) (with Sch. 2)

Modifications etc. (not altering text)

C1 S. 36 excluded (retrospective to 11.1.1994) by Finance Act 1994 (c. 9), ss. 252(1)(3), Sch. 24 para. 24

C2 See 1976(D) Sch.6 para.4. 1976(D)repealed by 1985 ss.93, 98(6)and Sch.27 Part Xwith effect from 19March 1985.

C3 S. 36(1) modified (with effect in accordance with s. 39(4)(5) of the modifying Act) by Finance Act 1995 (c. 4), s. 39(3), Sch. 6 para. 11

C4 See 1979(C) s.106and Sch.3 para.6(3)—effect of claim under s.36(2)(b)on computation of capital gains.

C5 See 1979(C) s.106and Sch.3 para.5(3)—deduction of amounts chargeable under s.36in computing capital gains.

Marginal Citations

M1 SOURCE-1970 s. 82(1), (2)

M2 SOURCE-1970 S. 82(3)

M3 SOURCE-1970 s. 82(1), (3)