Income Tax (Trading and Other Income) Act 2005

Part 3 U.K. Property income

Chapter 1 U.K. Introduction

260 Overview of Part 3 U.K.

(1) This Part imposes charges to income tax under—

(a) Chapter 3 (the profits of a UK property business or an overseas property business),

(b) Chapter 7 (amounts treated as adjustment income under section 330),

(c) Chapter 8 (rent receivable in connection with a UK section 12(4) concern),

(d) Chapter 9 (rent receivable for UK electric-line wayleaves), [F1 and ]

(e) Chapter 10 (post-cessation receipts arising from a UK property business)F2 ...

F2 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Part 6 deals with exemptions from the charges under this Part.

(3) See, in particular, the exemptions under sections 769 (housing grants), 777 (VAT repayment supplements) and 778 (incentives to use electronic communications).

(4) The charges under Chapters 3, 7, 8, 9 and 10 apply to non-UK residents as well as UK residents but this is subject to section 269 (charges on non-UK residents only on UK source income).

(5) This section needs to be read with the relevant priority rules (see sections 2 and 261).

Textual Amendments

F1 Word in s. 260(1)(d) inserted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 47(a)

F2 S. 260(1)(f) omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 47(b)

261 Provisions which must be given priority over Part 3 U.K.

Any receipt or other credit item, so far as it falls within—

(a) Chapter 3 of this Part so far as it relates to an overseas property business or Chapter 8 or 9 of this Part (rent receivable in connection with a UK section 12(4) concern or for UK electric-line wayleaves), and

(b) Chapter 2 of Part 2 (receipts of a trade, profession or vocation),

is dealt with under Part 2.

262 Priority between Chapters within Part 3 U.K.

(1) Any receipt, so far as it falls within—

(a) Chapter 3 so far as it relates to a UK property business, and

(b) Chapter 8 (rent receivable in connection with a UK section 12(4) concern),

is dealt with under Chapter 8.

(2) Any receipt, so far as it falls within—

(a) Chapter 3 so far as it relates to a UK property business, and

(b) Chapter 9 (rent receivable for UK electric-line wayleaves),

is dealt with under Chapter 9.

(3) Any receipt, so far as it falls within Chapter 8 (rent receivable in connection with a UK section 12(4) concern) and Chapter 9 (rent receivable for UK electric-line wayleaves), is dealt with under Chapter 9.

Chapter 2 U.K. Property businesses

Introduction U.K.

263 Introduction U.K.

(1) This Chapter explains for the purposes of this Act what is meant by—

(a) a person's UK property business (see section 264), and

(b) a person's overseas property business (see section 265).

(2) Both those sections need to be read with—

(a) section 266 (which explains what is meant by generating income from land), and

(b) section 267 (which provides that certain activities do not count as activities for generating income from land).

(3) In the case of the property business of a firm, the basic rules in sections 264 and 265 are explained in section 859(2) and (3).

(4) References in this Act to an overseas property business are to an overseas property business so far as any profits of the business are chargeable to tax under Chapter 3 (as to which see, in particular, section 269).

(5) Accordingly, nothing in Chapter 4 or 5 is to be read as treating an amount as a receipt of an overseas property business if the profits concerned would not be chargeable to tax under Chapter 3.

(6) In this Act “property business” means a UK property business or an overseas property business.

Basic meaning of UK and overseas property business U.K.

264 UK property business U.K.

A person's UK property business consists of—

(a) every business which the person carries on for generating income from land in the United Kingdom, and

(b) every transaction which the person enters into for that purpose otherwise than in the course of such a business.

265 Overseas property business U.K.

A person's overseas property business consists of—

(a) every business which the person carries on for generating income from land outside the United Kingdom, and

(b) every transaction which the person enters into for that purpose otherwise than in the course of such a business.

Generating income from land U.K.

266 Meaning of “generating income from land” U.K.

(1) In this Chapter “generating income from land” means exploiting an estate, interest or right in or over land as a source of rents or other receipts.

(2) “Rents” includes payments by a tenant for work to maintain or repair leased premises which the lease does not require the tenant to carry out.

(3) “Other receipts” includes—

(a) payments in respect of a licence to occupy or otherwise use land,

(b) payments in respect of the exercise of any other right over land, and

(c) rentcharges and other annual payments reserved in respect of, or charged on or issuing out of, land.

(4) For the purposes of this section a right to use a caravan or houseboat at only one location is treated as a right deriving from an estate or interest in land.

267 Activities not for generating income from land U.K.

For the purposes of this Chapter the following activities are not carried on for generating income from land—

(a) farming or market gardening in the United Kingdom (but see section 9 (UK farming or market gardening treated as trade)),

(b) any other occupation of land (but see section 10 (certain commercial occupation of UK land treated as trade)), and

(c) activities for the purposes of a concern to which section 12 applies (profits of mines, quarries etc.).

Chapter 3 U.K. Profits of property businesses: basic rules

Charge to tax on profits of a property business U.K.

268 Charge to tax on profits of a property business U.K.

Income tax is charged on the profits of a property business.

269 Territorial scope of charge to tax U.K.

(1) Profits of a UK property business are chargeable to tax under this Chapter whether the business is carried on by a UK resident or a non-UK resident.

(2) Profits of an overseas property business are chargeable to tax under this Chapter only if the business is carried on by a UK resident.

F3 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F4 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F3 S. 269(3) omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 48

F4 S. 269(4) omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 48

270 Income charged U.K.

(1) Tax is charged under this Chapter on the full amount of the profits arising in the tax year.

(2) Subsection (1) is subject to Part 8 (foreign income: special rules).

[F5 (3) If, as respects an individual carrying on an overseas property business, the tax year is a split year—

(a) tax is charged under this Chapter on so much of the profits referred to in subsection (1) as arise in the UK part of the tax year, and

(b) the portion of the profits arising in the overseas part of the tax year is, accordingly, not chargeable to tax under this Chapter.

(4) In determining how much of the profits arise in the UK part of the tax year—

(a) determine first how much of the non-CAA profits arise in the UK part by apportioning the non-CAA profits between the UK part and the overseas part on a just and reasonable basis, and

(b) then adjust the portion of the non-CAA profits arising in the UK part by deducting any CAA allowances for the year and adding any CAA charges for the year.

(5) In subsection (4)—

• “CAA allowances” means allowances treated under section 250 or 250A of CAA 2001 (capital allowances for overseas property businesses) as an expense of the business;

• “CAA charges” means charges treated under either of those sections as a receipt of the business;

• “non-CAA profits” means profits before account is taken of any CAA allowances or CAA charges.]

Textual Amendments

F5 S. 270(3)-(5) inserted (with effect in accordance with Sch. 45 para. 153(2) of the amending Act) by Finance Act 2013 (c. 29), Sch. 45 para. 81

271 Person liable U.K.

The person liable for any tax charged under this Chapter is the person receiving or entitled to the profits.

Calculation of profits U.K.

272 Profits of a property business: application of trading income rules U.K.

(1) The profits of a property business are calculated in the same way as the profits of a trade.

(2) But the provisions of Part 2 (trading income) which apply as a result of subsection (1) are limited to the following—

In Chapter 3 (basic rules)—
section 25	generally accepted accounting practice
section 26	losses calculated on same basis as profits
section 27	receipts and expenses
section 28	items treated under CAA 2001 as receipts and expenses
section 29	interest
In Chapter 4 (rules restricting deductions)—
section 33	capital expenditure
section 34	expenses not wholly and exclusively for trade and unconnected losses
section 35	bad and doubtful debts
sections 36 and 37	unpaid remuneration
sections 38 to 44	employee benefit contributions
sections 45 to 47	business entertainment and gifts
sections 48 to [F6 50B]	car F7 ... hire
F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
section 52	exclusion of double relief for interest
section 53	social security contributions
section 54	penalties, interest and VAT surcharges
section 55	crime-related payments
[F9 section 55A	expenditure on integral features]
In Chapter 5 (rules allowing deductions)—
section 57	pre-trading expenses
sections 58 and 59	incidental costs of obtaining finance
section 68	replacement and alteration of trade tools
section 69	payments for restrictive undertakings
sections 70 and 71	seconded employees
section 72	payroll deduction schemes: contributions to agents' expenses
sections 73 to 75	counselling and retraining expenses
sections 76 to 80	redundancy payments etc.
section 81	personal security expenses
sections 82 to 86	contributions to local enterprise organisations or urban regeneration companies
[F10 sections 86A and 86B	contributions to flood and coastal erosion risk management projects]
sections 87 and 88	scientific research
sections 89 and 90	expenses connected with patents, designs and trade marks
section 91	payments to Export Credits Guarantee Department
[F11 section 94A	costs of setting up SAYE option scheme or CSOP scheme]
[F12 section 94AA	deductions in relation to salaried members of limited liability partnerships]
In Chapter 6 (receipts)—
section 96	capital receipts
section 97	debts incurred and later released
section 104	distribution of assets of mutual concerns
section 105	industrial development grants
section 106	sums recovered under insurance policies etc.
In Chapter 7 (gifts to charities etc.)—
section 109	receipt by donor or connected person of benefit attributable to certain gifts
[F13 In Chapter 10A (long funding leases)—
Sections 148A to 148J	Leases of plant or machinery: special rules for long funding leases]
In Chapter 11 (other specific trades)—
section 155	levies and repayments under FISMA 2000
In Chapter 13 (deductions from profits)—
sections 188 to 191	unremittable amounts

(3) In those provisions the expression “this Part” is to be read as a reference to those provisions as applied by subsection (2) and to the other provisions of Part 3.

Textual Amendments

F6 Word in s. 272(2) Table substituted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 41(a)

F7 Words in s. 272(2) Table omitted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 41(b)

F8 S. 272(2) Table: entry repealed (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss, 1027, 1031, 1034, Sch. 1 para. 507, {Sch. 3 Pt. 1} (with transitional provisions and savings in Sch. 2)

F9 Words in s. 272(2) Table inserted (with effect in accordance with s. 73(6) of the amending Act) by Finance Act 2008 (c. 9), s. 73(5)

F10 Words in s. 272(2) Table inserted (with effect in accordance with Sch. 5 para. 9 of the amending Act) by Finance Act 2015 (c. 11), Sch. 5 para. 2

F11 Words in s. 272(2) Table inserted (1.4.2010) (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 7 para. 29 (with Sch. 9 paras. 1-9, 22)

F12 Words in s. 272(2) Table inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 17 paras. 3(3), 6

F13 S. 272(2) Table: entry relating to Ch. 10A (long funding leases) inserted (with effect as mentioned in Sch. 8 para. 15 of the amending Act) by Finance Act 2006 (c. 25), s. 81, Sch. 8 para. 14(2)

273 Amounts not brought into account as part of a property business U.K.

(1) The rules for calculating the profits of a property business need to be read with the following provisions of Part 2 (trading income)—

(a) section 19 (tied premises),

(b) section 20 (caravan sites where trade carried on),

(c) section 21 (surplus business accommodation), and

(d) section 22(3) (payments for wayleaves).

(2) Those provisions secure that amounts which would otherwise be brought into account in calculating the profits of the business are, or may be, brought into account instead in calculating the profits of a trade.

274 Relationship between rules prohibiting and allowing deductions U.K.

(1) Any relevant permissive rule in this Part—

(a) has priority over any relevant prohibitive rule in this Part, but

(b) is subject to [F14 section 36 (unpaid remuneration), section 38 (employee benefit contributions), section 48 (car F15 ... hire) and section] 55 (crime-related payments), as applied by section 272.

[F16 (1A) But, if the relevant permissive rule would allow a deduction in calculating the profits of a property business in respect of an amount which arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements, that rule—

(a) does not have priority under subsection (1)(a), and

(b) is subject to any relevant prohibitive rule in this Part (and to the provisions mentioned in subsection (1)(b)).]

(2) In this section “any relevant permissive rule in this Part” means any provision of this Part (apart from sections 291 to 294) which allows a deduction in calculating the profits of a property business.

(3) In this section “any relevant prohibitive rule in this Part”, in relation to any deduction, means any provision of this Part (apart from sections [F17 36, 38,] 48 and 55, as applied by section 272) which might otherwise be read as—

(a) prohibiting the deduction, or

(b) restricting the amount of the deduction.

[F18 (3A) In this section “relevant tax avoidance arrangements” means arrangements—

(a) to which the person carrying on the property business is a party, and

(b) the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage (within the meaning of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).]

(4) In this section any reference to any provision of this Part includes any provision applied by section 272.

Textual Amendments

F14 Words in s. 274(1)(b) substituted (with effect as stated in s. 67(7) of the amending Act) by Finance Act 2007 (c. 11), s. 67(5)

F15 Words in s. 274(1)(b) omitted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 42

F16 S. 274(1A) inserted (with effect in accordance with s. 78(5)-(7) of the amending Act) by Finance Act 2013 (c. 29), s. 78(2)(a)

F17 Words in s. 274(3) inserted (with effect as stated in s. 67(7) of the amending Act) by Finance Act 2007 (c. 11), s. 67(6)

F18 S. 274(3A) inserted (with effect in accordance with s. 78(5)-(7) of the amending Act) by Finance Act 2013 (c. 29), s. 78(2)(b)

Apportionment of profits U.K.

275 Apportionment etc. of profits to tax year U.K.

(1) This section applies if a period of account of a property business does not coincide with a tax year.

(2) Any of the following steps may be taken if they are necessary in order to arrive at the profits or losses of the tax year—

(a) apportioning the profits or losses of a period of account to the parts of that period falling in different tax years, and

(b) adding the profits or losses of a period of account (or part of a period) to profits or losses of other periods of account (or parts).

(3) The steps must be taken by reference to the number of days in the periods concerned.

(4) But the person carrying on the business may use a different way of measuring the length of the periods concerned if—

(a) it is reasonable to do so, and

(b) the way of measuring the length of periods is used consistently for the purposes of the business.

Chapter 4 U.K. Profits of property businesses: lease premiums etc.

Introduction U.K.

276 Introduction U.K.

(1) This Chapter provides for certain amounts (which would otherwise generally be amounts of a capital nature) to be brought into account as receipts in calculating the profits of a property business.

(2) The amounts relate to short-term leases in the case of—

• section 277 (lease premiums),

• section 278 (amount treated as lease premium where work required),

• section 280 (sums payable for surrender of lease), and

• section 282 (assignments for profit of lease granted at undervalue).

(3) The amounts relate to any lease in the case of—

• section 279 (sums payable instead of rent), and

• section 281 (sums payable for variation or waiver of [F19 terms] of lease).

(4) The amounts relate to the sale of any estate or interest in land in the case of—

• section 284 (sales with right to reconveyance), and

• section 285 (sale and leaseback transactions).

(5) This Chapter also permits certain deductions in calculating the profits of property businesses carried on by tenants under certain leases (see sections 291 and 292).

(6) In this Chapter “short-term lease” means a lease whose effective duration is 50 years or less.

Textual Amendments

F19 Word in s. 276(3) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 614 (with Sch. 2 Pts. 1, 2)

Amounts treated as receipts: leases U.K.

277 Lease premiums U.K.

(1) This section applies if a premium is required to be paid—

(a) under a short-term lease, or

(b) otherwise under the terms subject to which a short-term lease is granted.

(2) The person to whom the premium is due is treated as—

(a) entering into a transaction mentioned in section 264 (if the land to which the lease relates is in the United Kingdom) or section 265 (if that land is outside the United Kingdom), and

(b) receiving the amount calculated under subsections (4) and (5) 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 lease is granted.

(4) The amount of the receipt is given by the formula—

where—

P is the premium, and

Y is the number of complete periods of 12 months (other than the first) comprised in the effective duration of the lease.

(5) But, if the rule in section 288 (the additional calculation rule) applies, the amount given by the formula in subsection (4) is reduced by the amount calculated in accordance with section 288.

Modifications etc. (not altering text)

C1 Ss. 277-281 excluded (with effect as mentioned in Sch. 6 para. 6(2)-(7) of the amending Act) by 1981 c. 1, s. 774G(7) as inserted by Finance Act 2006 (c. 25), s. 76, Sch. 6 para. 6(1)

278 Amount treated as lease premium where work required U.K.

(1) This section applies if the terms subject to which a lease is granted impose on the tenant an obligation to carry out work on the premises.

(2) The lease is treated for the purposes of section 277 (lease premiums) as requiring the payment of a premium to the landlord (in addition to any other premium).

(3) The amount of the premium is the amount by which the value of the landlord's estate or interest immediately after the commencement of the lease exceeds what its value would have been at that time if the terms of the lease did not impose the obligation on the tenant.

(4) An obligation, or part of an obligation, that requires the carrying out of excepted work is ignored for the purposes of this section.

(5) Work is “excepted work” if the payment for carrying it out would, if the landlord and not the tenant were obliged to carry it out, be deductible as an expense in calculating the profits of the landlord's property business.

Modifications etc. (not altering text)

C2 Ss. 277-281 excluded (with effect as mentioned in Sch. 6 para. 6(2)-(7) of the amending Act) by 1981 c. 1, s. 774G(7) as inserted by Finance Act 2006 (c. 25), s. 76, Sch. 6 para. 6(1)

279 Sums payable instead of rent U.K.

(1) This section applies if—

(a) under the terms subject to which a lease is granted a sum becomes payable by the tenant instead of the whole or a part of the rent for a period, and

(b) the period is 50 years or less.

(2) The person to whom the sum is due is treated as—

(a) entering into a transaction mentioned in section 264 (if the land to which the lease relates is in the United Kingdom) or section 265 (if that land is outside the United Kingdom), and

(b) receiving the amount calculated under subsections (4) and (5) 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 [F20 of or] includes that transaction for the tax year in which the sum becomes payable.

(4) The amount of the receipt is given by the formula—

where—

S is the sum payable instead of rent, and

Y is the number of complete periods of 12 months (other than the first) comprised in the period in relation to which the sum is payable.

(5) But, if the rule in section 288 (the additional calculation rule) applies, the amount given by the formula in subsection (4) is reduced by the amount calculated in accordance with section 288.

(6) In determining for the purposes of this Chapter the duration of the period in relation to which the sum is payable, any part of the period that falls after the expiry of the effective duration of the lease is excluded.

Textual Amendments

F20 Words in s. 279(3) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 615 (with Sch. 2 Pts. 1, 2)

Modifications etc. (not altering text)

C3 Ss. 277-281 excluded (with effect as mentioned in Sch. 6 para. 6(2)-(7) of the amending Act) by 1981 c. 1, s. 774G(7) as inserted by Finance Act 2006 (c. 25), s. 76, Sch. 6 para. 6(1)

280 Sums payable for surrender of lease U.K.

(1) This section applies if, under the terms subject to which a short-term lease is granted, a sum becomes payable by the tenant as consideration for the surrender of the lease.

(2) The person to whom the sum is due is treated as—

(a) entering into a transaction mentioned in section 264 (if the land to which the lease relates is in the United Kingdom) or section 265 (if that land is outside the United Kingdom), and

(b) receiving the amount calculated under subsections (4) and (5) 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 sum becomes payable.

(4) The amount of the receipt is given by the formula—

where—

S is the sum payable as consideration for the surrender of the lease, and

Y is the number of complete periods of 12 months (other than the first) comprised in the effective duration of the lease.

(5) But, if the rule in section 288 (the additional calculation rule) applies, the amount given by the formula in subsection (4) is reduced by the amount calculated in accordance with section 288.

Modifications etc. (not altering text)

C4 Ss. 277-281 excluded (with effect as mentioned in Sch. 6 para. 6(2)-(7) of the amending Act) by 1981 c. 1, s. 774G(7) as inserted by Finance Act 2006 (c. 25), s. 76, Sch. 6 para. 6(1)

281 Sums payable for variation or waiver of [F21 terms] of lease U.K.

(1) This section applies if—

(a) a sum becomes payable by the tenant (otherwise than by way of rent) as consideration for the variation or waiver of a term of a lease,

(b) the sum is due to the landlord or a person who is connected with the landlord, and

(c) the period for which the variation or waiver has effect is 50 years or less.

(2) The person to whom the sum is due is treated as—

(a) entering into a transaction mentioned in section 264 (if the land to which the lease relates is in the United Kingdom) or section 265 (if that land is outside the United Kingdom), and

(b) receiving the amount calculated under subsections (4) and (5) 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 contract providing for the variation or waiver is entered into.

(4) The amount of the receipt is given by the formula—

where—

S is the sum payable as consideration for the variation or waiver, and

Y is the number of complete periods of 12 months (other than the first) comprised in the period for which the variation or waiver has effect.

(5) But, if the rule in section 288 (the additional calculation rule) applies, the amount given by the formula in subsection (4) is reduced by the amount calculated in accordance with section 288.

(6) In determining for the purposes of this Chapter the duration of the period for which the variation or waiver has effect, any part of the period that falls after the expiry of the effective duration of the lease is excluded.

Textual Amendments

F21 Word in s. 281 title substituted (1.4.2009) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 616 (with Sch. 2 Pts. 1, 2)

Modifications etc. (not altering text)

C5 Ss. 277-281 excluded (with effect as mentioned in Sch. 6 para. 6(2)-(7) of the amending Act) by 1981 c. 1, s. 774G(7) as inserted by Finance Act 2006 (c. 25), s. 76, Sch. 6 para. 6(1)

[F22 281A Sums to which sections 277 to 281 do not apply U.K.

(1) This section applies if a grant of a lease constitutes a disposal of an asset for the purposes of section 809BZA(2)(b) or 809BZF(2)(a) of ITA 2007 (disposals under finance arrangements).

(2) Sections 277 to 281 do not apply in relation to a premium paid in respect of the grant.]

Textual Amendments

F22 S. 281A inserted (1.4.2010) (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 270 (with Sch. 9 paras. 1-9, 22)

282 Assignments for profit of lease granted at undervalue U.K.

(1) This section applies to an assignment of a short-term lease if—

(a) the lease was granted at an undervalue, and

(b) a profit is made on the assignment.

(2) The person who assigns the lease is treated as—

(a) entering into a transaction mentioned in section 264 (if the land to which the lease relates is in the United Kingdom) or section 265 (if that land is outside the United Kingdom), and

(b) receiving the amount calculated under subsections (4) and (5) 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 consideration for the assignment becomes payable.

(4) The amount of the receipt is given by the formula—

where—

P is the lesser of—

• (a) the profit on the assignment, and

• (b) the amount by which the undervalue exceeds the total of the profits (if any) made on previous assignments of the lease, and

Y is the number of complete periods of 12 months (other than the first) comprised in the effective duration of the lease.

(5) But, if the rule in section 288 (the additional calculation rule) applies, the amount given by the formula in subsection (4) is reduced by the amount calculated in accordance with section 288.

(6) Section 283 explains references in this section to the grant of a lease at an undervalue and the making of a profit on an assignment of a lease.

283 Provisions supplementary to section 282 U.K.

(1) This section operates for the purposes of section 282.

(2) A lease is granted at an undervalue if the terms subject to which it was granted are such that the landlord who granted it could have required the payment of an additional sum by way of premium, or additional premium, for its grant.

(3) The additional sum is the undervalue.

(4) The test in subsection (2) must be applied—

(a) having regard to values prevailing at the time the lease was granted, and

(b) on the assumption that the negotiations for the lease were at arm's length.

(5) A profit is made on an assignment of a lease if the consideration for the assignment exceeds—

(a) if the lease has not previously been assigned, any premium for which it was granted, or

(b) in any other case, any consideration for which it was last assigned.

(6) The amount of the excess is the profit.

Other amounts treated as receipts U.K.

284 Sales with right to reconveyance U.K.

(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.

285 Sale and leaseback transactions U.K.

(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.

286 Provisions supplementary to sections 284 and 285 U.K.

(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.

Additional calculation rule for reducing certain receipts U.K.

287 Circumstances in which additional calculation rule applies U.K.

(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 [F23 terms] 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, F24 ...

(b) there would be such a receipt, but for the operation of the [F25 rule in section 288 (the additional calculation rule)] in the calculation of its amount.

[F26 (c) there is a receipt under any of sections 217 to 222 of CTA 2009 (receipts in respect of lease premiums, sums payable instead of rent, for surrender of lease and for variation or waiver of terms of lease and assignments) in respect of the lease, or

(d) there would be such a receipt, but for the operation of the rule in section 228 of that Act (the additional calculation rule) in the calculation of its amount.]

In this Chapter [F27 a receipt falling within paragraph (a), (b), (c) or (d)] 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”.

Textual Amendments

F23 Word in s. 287(1) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 617(2) (with Sch. 2 Pts. 1, 2)

F24 Word in s. 287(4) repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 617(3)(a), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F25 Words in s. 287(4)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 617(3)(b) (with Sch. 2 Pts. 1, 2)

F26 S. 287(4)(c)(d) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 617(3)(c) (with Sch. 2 Pts. 1, 2)

F27 Words in s. 287(4) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 617(3)(d) (with Sch. 2 Pts. 1, 2)

288 The additional calculation rule U.K.

(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 [F28 282 above, or in section 217, 219, 220, 221 or 222 of CTA 2009,] but see section 290(2) to (4) [F29 above]),

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, F30 ...

(d) in the case of a receipt under section 282, the effective duration of the lease remaining at the date of the assignment[F31 , and

(e) in the case of a receipt under Chapter 4 of Part 4 of CTA 2009 (profits of property businesses: lease premiums etc), its receipt period within the meaning of that Chapter (see section 228(6) of that Act).]

Textual Amendments

F28 Words in s. 288(4) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 618(2)(a) (with Sch. 2 Pts. 1, 2)

F29 Word in s. 288(4) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 618(2)(b) (with Sch. 2 Pts. 1, 2)

F30 Word in s. 288(6) repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 618(3)(a), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F31 S. 288(6)(e) and word inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 618(3)(b) (with Sch. 2 Pts. 1, 2)

289 The additional calculation rule: special cases U.K.

(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.

290 Meaning of “unused amount” and “unreduced amount” U.K.

(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 [F32 formula in—

(a) section 277, 279, 280, 281 or 282 above, or

(b) section 217, 219, 220, 221 or 222 of CTA 2009 (corporation tax provisions corresponding to those listed in paragraph (a)).]

[F33 (3) Subsection (4) applies—

(a) to a taxed receipt under section 277 (lease premiums) as a result of section 278 (amount treated as lease premium where work required), and

(b) to a taxed receipt under section 217 of CTA 2009 (lease premiums) as a result of section 218 of that Act (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 [F34 above or section 228 of CTA 2009 (the additional calculation rule)] 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 [F35 above or section 63 of CTA 2009] (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 [F36 below or section 232 of CTA 2009] (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 [F37 above or section 228 of CTA 2009] by reference to a taxed receipt are to a reduction under [F38 the section concerned] so far as attributable to the taxed receipt.

Textual Amendments

F32 Words in s. 290(2) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 619(2) (with Sch. 2 Pts. 1, 2)

F33 S. 290(3) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 619(3) (with Sch. 2 Pts. 1, 2)

F34 Words in s. 290(5)(a) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 619(4)(a) (with Sch. 2 Pts. 1, 2)

F35 Words in s. 290(5)(b) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 619(4)(b) (with Sch. 2 Pts. 1, 2)

F36 Words in s. 290(5)(c) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 619(4)(c) (with Sch. 2 Pts. 1, 2)

F37 Words in s. 290(6) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 619(5)(a) (with Sch. 2 Pts. 1, 2)

F38 Words in s. 290(6) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 619(5)(b) (with Sch. 2 Pts. 1, 2)

Deductions in relation to certain receipts U.K.

291 Deductions for expenses under section 292 U.K.

(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”).

292 Tenants under taxed leases treated as incurring expenses U.K.

(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.

[F39 (4A) No expense is to be determined under this section by reference to the taxed receipt if subsection (4B) or (4C) applies.

(4B) This subsection applies if there would have been no taxed receipt but for the application of Rule 1 in section 303 in determining the effective duration of the lease.

(4C) This subsection applies if there would have been no taxed receipt but for the application of Rule 1 in section 243 of CTA 2009 in determining the effective duration of the lease for the purposes of Chapter 4 of Part 4 of that Act.]

(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”).

Textual Amendments

F39 S. 292(4A)-(4C) inserted (with effect in accordance with Sch. 28 para. 4 of the amending Act) by Finance Act 2013 (c. 29), Sch. 28 para. 3

293 Restrictions on section 292 expenses: the additional calculation rule U.K.

[F40 (1) This section applies if—

(a) in calculating the amount of a receipt under this Chapter there is a reduction under section 288 (the additional calculation rule) by reference to a taxed receipt, or

(b) in calculating the amount of a receipt under Chapter 4 of Part 4 of CTA 2009 (profits of a property business: lease premiums etc) there is a reduction under section 228 of that Act (the additional calculation rule) by reference to a taxed receipt.

The receipt that is so reduced is referred to in this section as the “lease premium 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 [F41 above or section 228 of CTA 2009] 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.

Textual Amendments

F40 S. 293(1) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 620(2) (with Sch. 2 Pts. 1, 2)

F41 Words in s. 293(6) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 620(3) (with Sch. 2 Pts. 1, 2)

294 Restrictions on section 292 expenses: lease of part of premises U.K.

(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

[F42 (c) the condition in subsection (1A) is met.

(1A) The condition is that—

(a) 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 terms of lease) in respect of the lease, there is a reduction under section 288 by reference to a taxed receipt, or

(b) in calculating the amount of a receipt under any of sections 217 to 221 of CTA 2009 (receipts in respect of lease premiums or sums payable instead of rent, for surrender of lease or for variation or waiver of terms of lease) in respect of the lease, there is a reduction under section 228 of that Act (the additional calculation rule) by reference to a taxed receipt.

The receipt that is so reduced is referred to in this section as the “lease premium 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.

Textual Amendments

F42 S. 294(1)(c)(1A) substituted for s. 294(1)(c) (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 621 (with Sch. 2 Pts. 1, 2)

Limit on effect of additional calculation rule and deductions U.K.

295 Limit on reductions and deductions U.K.

(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

[F43 (b) the total of the amounts mentioned in subsection (3).

(3) Those amounts are—

(a) the reductions under section 228 of CTA 2009 (the additional calculation rule) by reference to the taxed receipt,

(b) the deductions allowed in calculating the profits of a property business for expenses under section 232 of CTA 2009 (tenant under taxed lease which uses premises for purposes of property business treated as incurring expenses) by reference to the taxed receipt, and

(c) the deductions allowed in calculating the profits of a trade, profession or vocation for expenses under section 61 above or section 63 of CTA 2009 (tenant under taxed lease who uses land in connection with trade treated as incurring expenses) by reference to the taxed receipt.]

Textual Amendments

F43 S. 295(2)(b)(3) substituted for s. 295(2)(b) (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 622 (with Sch. 2 Pts. 1, 2)

Relationship with ICTA U.K.

296 Corporation tax receipts treated as taxed receipts U.K.

(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 [F44 but before 1st April 2009], 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.

Textual Amendments

F44 Words in s. 296(1)(a) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 623 (with Sch. 2 Pts. 1, 2)

297 Taking account of reductions in corporation tax receipts U.K.

(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.

298 Taking account of deductions for rent as a result of section 37(4) or 87(2) of ICTA U.K.

(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 [F45 but before 1st April 2009], 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 [F46 295(3)(c)] 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 [F47 but before 1st April 2009], 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.

Textual Amendments

F45 Words in s. 298(1)(a) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 624(a) (with Sch. 2 Pts. 1, 2)

F46 Word in s. 298(2) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 624(b) (with Sch. 2 Pts. 1, 2)

F47 Words in s. 298(3)(a) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 624(a) (with Sch. 2 Pts. 1, 2)

Certain administrative provisions U.K.

299 Payment of tax by instalments U.K.

(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 [F48 terms] 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 [F49 an officer of Revenue and Customs] 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.

Textual Amendments

F48 Word in s. 299(1)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 625 (with Sch. 2 Pts. 1, 2)

F49 Words in s. 299(2) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 ss. 50, 53(1), {Sch. 4 para. 132(2)}; S.I. 2005/1126, art. 2(h)

300 Statement of accuracy for purposes of section 282 U.K.

(1) This section applies if any of the persons mentioned in subsection (3) provides [F50 an officer of Revenue and Customs] 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) [F50 an officer of Revenue and Customs] 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.

Textual Amendments

F50 Words in s. 300(1)(2) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 ss. 50, 53(1), {Sch. 4 para. 132(1)}; S.I. 2005/1126, art. 2(h)

301 Claim for repayment of tax payable by virtue of section 284 U.K.

(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 [F51 4 years] after the day on which the estate or interest was reconveyed.

Textual Amendments

F51 Words in s. 301(3) substituted (1.4.2010) by Finance Act 2008 (c. 9), s. 118(2), Sch. 39 para. 51; S.I. 2009/403, art. 2(2) (with art. 10)

302 Claim for repayment of tax payable by virtue of section 285 U.K.

(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 [F52 4 years] after the day on which the lease was granted.

Textual Amendments

F52 Words in s. 302(3) substituted (1.4.2010) by Finance Act 2008 (c. 9), s. 118(2), Sch. 39 para. 52; S.I. 2009/403, art. 2(2) (with art. 10)

[F53 Determinations affecting liability of more than one person U.K.

Textual Amendments

F53 Ss. 302A-302C and cross-heading inserted (1.4.2010) (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 7 para. 22 (with Sch. 9 paras. 1-9, 22)

302A Appeals against proposed determinations U.K.

(1) Subsection (2) applies if it appears to an officer of Revenue and Customs that—

(a) a determination is needed of an amount that is to be brought into account as a receipt under this Chapter in calculating the liability to tax of a person (“the first taxpayer”), and

(b) the determination may affect the liability to income tax, corporation tax or capital gains tax of other persons.

(2) The officer may give notice (a “provisional notice of determination”) to the first taxpayer and the other persons of—

(a) the determination the officer proposes to make, and

(b) their rights under this section and section 302C.

(3) A person to whom a provisional notice of determination is given may object to the proposed determination by giving notice (a “notice of objection”) to the officer.

(4) The notice of objection must be given within 30 days of the date on which the provisional notice of determination was given.

(5) If an officer gives provisional notices of determination and no person gives a notice of objection—

(a) a determination must be made by the officer as proposed in the provisional notices, and

(b) the determination is not to be called in question in any proceedings.

302B Section 302A: supplementary U.K.

(1) A provisional notice of determination under section 302A(2) may include a statement of the grounds on which the officer proposes to make the determination.

(2) Subsection (1) applies despite any obligation as to secrecy or other restriction on the disclosure of information.

F54 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F54 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F54 S. 302B(3)(4) omitted (with effect in accordance with Sch. 23 para. 65 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 23 paras. 57(2), 65(1)(a) (with Sch. 23 paras. 50, 65(1)(b))

302C Determination by tribunal U.K.

(1) If a notice of objection is given under section 302A(3), the amount mentioned in section 302A(1) must be determined in the same way as an appeal.

(2) All persons to whom provisional notices of determination have been given under section 302A(2) may be a party to—

(a) any proceedings under subsection (1), and

(b) any appeal arising out of those proceedings.

(3) Those persons are bound by the determination made in the proceedings or on appeal, whether or not they have taken part in the proceedings.

(4) Their successors in title are bound in the same way.]

Effective duration of lease U.K.

303 Rules for determining effective duration of lease U.K.

(1) The following rules apply for determining the effective duration of a lease for the purposes of this Chapter.

[F55 Rule 1: If-

( a) the terms of the lease or any other circumstances make it unlikely that the lease will continue beyond a date before the end of the term for which the lease was granted, and

(b) the premium was not substantially greater than it would have been had the term been one ending on that date,]

Rule 2: If the terms of the lease include provision for the extension of the lease beyond a given date by notice given by the tenant, account may be taken of any circumstances making it likely that the lease will be so extended.

Rule 3: If the tenant or a person connected with the tenant is, or may become, entitled to a further lease or the grant of a further lease (whenever commencing)—

(a)  of the same premises, or

(b)  of premises including the whole or part of the same premises,

the term of the lease may be treated as continuing until the end of the term of the further lease.

(2) The rules are to be applied in accordance with section 304.

[F56 (2A) In Rule 1 “premium” includes—

(a) an amount treated as a premium under section 278 (amount treated as lease premium where work required),

(b) a sum payable by the tenant under the terms subject to which the lease is granted instead of the whole or a part of the rent for a period,

(c) a sum payable by the tenant under the terms subject to which the lease is granted as consideration for the surrender of the lease, and

(d) a sum payable by the tenant (otherwise than by way of rent) as consideration for the variation or waiver of a term of the lease.]

(3) In this section and section 304, in relation to Scotland, “term”, where referring to the duration of a lease, means period.

Textual Amendments

F55 Words in s. 303 substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 626(2) (with Pts. 1, 2, Sch. 2 para. 44)

F56 S. 303(2A) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 626(3) (with Pts. 1, 2, Sch. 2 para. 44)

Modifications etc. (not altering text)

C6 S. 303 applied by 2001 c. 2, s. 360I(3)(a) (as inserted (7.4.2005 with effect in relation to expenditure incurred on or after 11.4.2007) by Finance Act 2005 (c. 7). s. 92, {Sch. 6 para. 1}; S.I. 2007/949, art. 2

304 Applying the rules in section 303 U.K.

(1) The rules in section 303 apply by reference to the facts known or ascertainable—

(a) at the time of the grant of the lease, or

(b) if the determination is for the purposes of section 281 (sums payable for variation or waiver of [F57 terms] of lease), at the time when the contract for the variation or waiver is entered into.

(2) In applying those rules, it is assumed that all parties concerned, whatever their relationship, act as if they were at arm's length.

(3) Subsection (5) applies if—

(a) special benefits were conferred by the lease or in connection with its grant, or

(b) payments were made which one would not expect to be made by parties acting at arm's length unless such benefits had been conferred.

(4) But subsection (5) does not apply if it can be shown that the special benefits were not conferred nor the payments made for the purpose of [F58 securing—

(a) an income tax advantage in the application of this Chapter, or

(b) a corporation tax advantage in the application of Chapter 4 of Part 4 of CTA 2009 (profits of property business: lease premiums etc).]

(5) In applying [F59 paragraph (b) of] rule 1 in section 303, it is assumed that the special benefits would not have been conferred nor the payments made if the lease had been granted for a term ending on the date mentioned in that rule.

(6) In this section “special benefits” means benefits other than—

(a) vacant possession and beneficial occupation of the premises, or

(b) the right to receive rent at a reasonable commercial rate in respect of the premises.

Textual Amendments

F57 Word in s. 304(1)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 627(2) (with Sch. 2 Pts. 1, 2)

F58 Words in s. 304(4) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 627(3) (with Sch. 2 Pts. 1, 2)

F59 Words in s. 304(5) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 627(4) (with Sch. 2 Pts. 1, 2)

F60 305 Information about effective duration of lease U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F60 S. 305 omitted (13.8.2009) by virtue of The Finance Act 2009, Schedule 47 (Consequential Amendments) Order 2009 (S.I. 2009/2035), art. 1, Sch. para. 44

Other interpretative provisions U.K.

306 Provisions about premiums U.K.

(1) For the purposes of this Chapter, the presumption is that a sum paid on or in connection with the granting of a tenancy has been paid by way of premium.

(2) This does not apply if the sum is rent.

(3) This also does not apply so far as other sufficient consideration for the payment can be shown to have been given.

(4) In this section “sum” includes the value of any consideration.

(5) Where rule 3 in section 303 (rules for determining effective duration of lease) applies, the premium, or an appropriate part of it, payable for or in connection with either lease mentioned in that rule may be treated for the purposes of this Chapter as having been required under the other.

307 Interpretation U.K.

(1) In this Chapter “premium” includes any similar sum payable to the immediate or a superior landlord or to a person connected with such a person.

(2) In subsection (1) “sum” includes the value of any consideration.

(3) In the application of this Chapter to Scotland—

• “premium” includes, in particular, a grassum payable to the landlord under the lease in respect of which the grassum is payable or the landlord under any other lease of the property, and

• “reversion” means the interest of the landlord in the property subject to the lease.

(4) In the application of this Chapter to Scotland—

(a) references to a lease being granted out of a taxed lease are to the grant of a sublease of land subject to the taxed lease, and

(b) references to the lease so granted are to be read as references to the sublease.

Chapter 5 U.K. Profits of property businesses: other rules about receipts and deductions

Furnished accommodation: receipts and deductions U.K.

308 Furnished lettings U.K.

(1) In calculating the profits of a property business which consists of or includes a furnished letting—

(a) any sum payable for the use of furniture is brought into account as a receipt, and

(b) a deduction is allowed for expenses incurred in connection with the provision of furniture.

(2) But subsection (1) does not apply to receipts or expenses brought into account in calculating the profits of a trade which consists of, or involves, making furniture available for use in premises.

(3) A furnished letting is a lease or other arrangement under which—

(a) a sum is payable in respect of the use of premises, and

(b) the person entitled to the use of the premises is also entitled, in connection with that use, to the use of furniture.

(4) In this section—

(a) “premises” includes a caravan and a houseboat, and

(b) “sum” includes the value of any consideration.

[F61 Furnished accommodation: wear and tear allowance U.K.

Textual Amendments

F61 Ss. 308A-308C and cross-heading inserted (with effect in accordance with art. 13(1) of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2011 (S.I. 2011/1037), arts. 1, 11(2)

308A Wear and tear allowance election U.K.

(1) Where—

(a) a person (“P”) carries on a property business in a tax year which consists of or includes a furnished letting, and

(b) a dwelling-house that is subject to the letting is eligible in relation to P at any time in the year,

P may make an election (a “wear and tear allowance election”) in relation to the business for the year.

(2) A wear and tear allowance election for a tax year must be made on or before the first anniversary of the normal self-assessment filing date for the tax year.

(3) In this section and sections 308B and 308C, “furnished letting” means a furnished letting as defined in section 308 but does not include a commercial letting of furnished holiday accommodation (within the meaning of Chapter 6).

(4) See—

• section 308B for the meaning of “eligible” in relation to a dwelling-house, and

  section 308C for the effect of a wear and tear allowance election.

308B Meaning of “eligible” in relation to a dwelling-house U.K.

(1) A dwelling-house is “eligible” at any time in relation to a person (“P”) who carries on a property business in a tax year if, at that time—

(a) the dwelling-house is subject to a furnished letting comprised in the business,

(b) the dwelling-house contains sufficient furniture, furnishings and equipment for normal residential use, and

(c) P is responsible for the state of affairs mentioned in paragraph (b).

(2) P is so responsible if—

(a) any of the furniture, furnishings and equipment contained in the dwelling-house at the time mentioned in subsection (1) is provided by P,

(b) that furniture, furnishings and equipment, together with any furniture, furnishings and equipment in the dwelling-house at that time provided by a superior landlord of P, is sufficient for normal residential use, and

(c) the conditions in paragraphs (a) and (b) are not met in relation to a superior landlord of P.

(3) References in this section to a superior landlord of P are to any person who—

(a) has an interest in the dwelling-house that is superior to that of P, and

(b) carries on a property business in the tax year that consists of or includes a furnished letting to which the dwelling-house is subject.

308C Effect of wear and tear allowance election U.K.

(1) This section applies where a person (“P”) makes a wear and tear allowance election that has effect in relation to a property business (“the property business”) for a tax year (“the tax year”).

(2) In calculating the profits of the property business for the tax year—

(a) a wear and tear allowance is allowed as a deduction, and

(b) no deduction is allowed—

(i) whether under section 68 or otherwise, for expenses incurred on replacing or altering any tool (within the meaning of subsection (3) of that section), so far as the expenses are within subsection (6), or

(ii) whether under section 308 or otherwise, for expenses incurred in connection with the provision of furniture, so far as the expenses are within subsection (6).

(3) The amount of the wear and tear allowance is 10% of the relevant rental amount.

(4) In subsection (3) “the relevant rental amount” means—

(a) the sum of the amounts brought into account as receipts by P in calculating the profits of the property business, so far as the receipts are within subsection (6), less

(b) the sum of any amounts brought into account as relevant expenses by P in calculating the profits of the property business, so far as the expenses are within subsection (6).

(5) In subsection (4)(b) “relevant expenses” means expenses in relation to utilities, council tax or anything else the cost of which is, in the case of a furnished letting, normally borne by the lessee.

(6) Receipts or expenses are within this subsection so far as they are attributable to a dwelling-house that is subject to a furnished letting comprised in the property business, but disregarding any amounts that are so attributable in respect of a time at which the dwelling-house is not eligible in relation to P.

(7) Receipts and expenses are to be attributed for the purposes of subsection (6) on a just and reasonable basis.

Furnished accommodation: rent-a-room relief] U.K.

309 Rent-a-room relief U.K.

(1) The rules for calculating the profits of an individual's UK property business are subject to Chapter 1 of Part 7 (rent-a-room relief).

(2) That Chapter provides relief on income from the use of furnished accommodation in the individual's only or main residence (see, in particular, sections 793 and 797).

Treatment of receipts on acquisition of business U.K.

310 Acquisition of business: receipts from transferor's UK property business U.K.

(1) This section applies if—

(a) a person (“the transferor”) permanently ceased to carry on a UK property business at any time,

(b) at that time the transferor transferred to another (“the transferee”) the right to receive sums arising from the carrying on of any business (“the transferred business”) comprised in the transferor's UK property business, and

(c) the transferee subsequently carries on the transferred business.

(2) Sums—

(a) which the transferee receives as a result of the transfer, and

(b) which are not brought into account in calculating the profits of the transferor's UK property business for any period before the cessation,

are brought into account in calculating the profits of the transferee's UK property business in the period of account in which they are received.

(3) Any sums mentioned in subsection (1)(b) which are received after the cessation of the transferor's property business are not post-cessation receipts (see Chapter 10).

(4) This section has effect as if it were contained in Chapter 10.

Reverse premiums as receipts U.K.

311 Reverse premiums U.K.

(1) This section applies if—

(a) a person receives a reverse premium, and

(b) the reverse premium is not brought into account under section 101(2) in calculating the profits of any trade carried on by the person.

(2) The person is treated as—

(a) entering into a transaction mentioned in section 264 (if the land to which the property transaction relates is in the United Kingdom) or section 265 (if that land is outside the United Kingdom), and

(b) receiving the reverse premium as a result of that transaction.

(3) Accordingly, the reverse premium is brought into account as a receipt in calculating the profits of the property business which consists of or includes that transaction.

(4) Subsection (5) applies if—

(a) two or more of the parties to the property arrangements are connected persons, and

(b) the terms of those arrangements are not such as would reasonably have been expected if those persons had been dealing at arm's length.

(5) The whole amount or value of the reverse premium is brought into account in the period of account in which the property transaction is entered into.

(6) Expressions used in this section and sections 99 to 103 have the same meaning in this section as they do in those sections.

Deductions for expenditure on energy-saving items U.K.

312 Deduction for expenditure on energy-saving items U.K.

(1) This section applies if—

(a) a person carries on a property business in relation to land which consists of or includes a dwelling-house,

(b) the person incurs expenditure in acquiring and installing [F62 an energy-saving item in the dwelling-house or in a building containing the dwelling-house ](see subsections (5) to (7)),

(c) the expenditure is incurred before 6th April [F63 2015] ,

(d) a deduction for the expenditure is not prohibited by the wholly and exclusively rule but would otherwise be prohibited by the capital prohibition rule (see subsection (8)), and

(e) no allowance under CAA 2001 may be claimed in respect of the expenditure.

(2) In calculating the profits of the business, a deduction for the expenditure is allowed.

(3) But any deduction is subject to—

(a) section 313 (restrictions on the relief), and

(b) any provision made by regulations under section 314.

(4) If, on a just and reasonable apportionment of any expenditure, part of the expenditure would qualify for the relief (but the remainder would not), a deduction is allowed for that part.

(5) “Energy-saving item” means—

(a) cavity wall insulation,

(b) loft insulation, or

(c) such other descriptions of items of an energy-saving nature as are for the time being specified in regulations made by the Treasury.

(6) The Treasury may by regulations provide for an item to be treated as an energy-saving item only if it satisfies such conditions as may be—

(a) specified in, or

(b) determined in accordance with,

the regulations.

(7) The conditions may include conditions imposed by reference to information or documents issued by any body, person or organisation.

(8) In this section—

• “the capital prohibition rule” means the rule in section 33 (capital expenditure), as applied by section 272, and

• “the wholly and exclusively rule” means the rule in section 34 (expenses not wholly and exclusively for trade and unconnected losses), as applied by section 272.

Textual Amendments

F62 Words in s. 312(1)(b) substituted (19.7.2007 with effect as stated in s. 18(6) of the amending Act) by Finance Act 2007 (c. 11), s. 18(2)

F63 Word in s. 312(1)(c) substituted (19.7.2007) by Finance Act 2007 (c. 11), s. 18(3)

313 Restrictions on relief U.K.

(1) This section restricts deductions that would otherwise be allowable under section 312.

(2) No deduction is allowed if, when the energy-saving item is installed, the dwelling-house—

(a) is in the course of construction, or

(b) is comprised in land in which the person does not have an interest or is in the course of acquiring an interest or further interest.

(3) No deduction is allowed in respect of expenditure in a tax year if—

(a) the business consists of or includes the commercial letting of furnished holiday accommodation (see Chapter 6), and

(b) the dwelling-house constitutes some or all of that accommodation for the tax year.

(4) No deduction is allowed if—

(a) the person derives rent-a-room receipts from the dwelling-house, and

(b) those receipts are brought into account in calculating the profits of the business in accordance with section 793 or 797 (rent-a-room relief).

(5) No deduction is allowed in respect of expenditure treated by section 57 (as applied by section 272) as incurred on the date on which the person starts to carry on the business unless the expenditure was incurred not more than 6 months before that date.

[F64 (6) No deduction is allowed in respect of expenditure incurred in acquiring and installing the energy-saving item in a building containing the dwelling-house in so far as the expenditure is not for the benefit of the dwelling-house.]

Textual Amendments

F64 S. 313(6) inserted (19.7.2007 with effect as stated in s. 18(6) of the amending Act) by Finance Act 2007 (c. 11), s. 18(4)

314 Regulations U.K.

(1) In relation to any deduction under section 312, the Treasury may make regulations for—

(a) restricting or reducing the amount of expenditure for which the deduction is allowable,

(b) excluding entitlement to the deduction in such cases as may be specified in, or determined in accordance with, the regulations,

(c) determining who is (and is not) entitled to the deduction if different persons have different interests in land that consists of or includes the whole or part of a building containing one or more dwelling-houses,

(d) making apportionments if the property business is carried on by persons in partnership or an interest in land is beneficially owned by persons jointly or in common.

(2) The apportionments that may be made include apportionments to companies within the charge to corporation tax.

[F65 (3) Regulations under this section may—

(a) make different provision for different cases, and

(b) contain incidental, supplemental, consequential and transitional provision and savings (including provision as to appeals in relation to apportionments mentioned in subsection (1)(d)).]

Textual Amendments

F65 S. 314(3) inserted (retrospectively with effect as stated in s. 18(7)(8) of the amending Act) by Finance Act 2007 (c. 11), s. 18(5)

Deductions for expenditure on sea walls U.K.

315 Deduction for expenditure on sea walls U.K.

(1) This section applies if in a tax year a person —

(a) is the owner or tenant of any premises, and

(b) incurs expenditure in making a sea wall or other embankment necessary for the preservation or protection of the premises against the encroachment or overflowing of the sea or any tidal river.

(2) In calculating the profits of any property business carried on by the person in relation to the premises, a deduction is allowed for the expenditure in each tax year in the deduction period.

(3) The deduction period comprises—

(a) the tax year in which the expenditure is incurred, and

(b) the next 20 tax years.

(4) The amount of the deduction is 1/21 of the expenditure.

(5) No deduction is allowed for any expenditure in respect of which a capital allowance has been made.

(6) Section 316 deals with the case of an interest in the premises being transferred (and this section applies in that case as if the reference to the person in subsection (2) above included the transferor and the transferee).

316 Transfer of interest in premises U.K.

(1) This section applies if, during the deduction period, the whole of the person's interest in the premises or in any part of them is transferred, whether by operation of law or otherwise.

(2) For the tax year in which the transfer takes place—

(a) the transferor and the transferee are entitled to a part of any deduction under section 315, and

(b) the amount of the deduction is determined by what is just and reasonable.

(3) For subsequent tax years in the deduction period, the entitlement to any deduction under section 315 depends on whether the interest transferred is in the whole of the premises or in part of them.

(4) If the interest transferred is in the whole of the premises, the transferee (but not the transferor) is entitled to any deduction under section 315.

(5) If the interest transferred is in part of the premises—

(a) the transferor and the transferee are entitled to a part of any deduction under section 315, and

(b) the amount of the deduction is determined by reference to what is properly referable to the part of the premises.

(6) This section is supplemented by sections 317 (ending of lease of premises) and 318 (transfer involving company within the charge to corporation tax).

317 Ending of lease of premises U.K.

(1) If a person's interest in the premises is a lease that comes to an end before the end of the deduction period, the interest is treated as if transferred to the following persons.

(2) If a new lease of the premises is granted and the new tenant makes a payment in respect of the embankment in question to the old tenant, the transferee is the new tenant.

(3) Otherwise the transferee is the owner of the interest in immediate reversion on the lease (or, in Scotland, the landlord).

318 Transfer involving company within the charge to corporation tax U.K.

(1) This section explains how section 316 works if—

(a) the transferor is a person within the charge to income tax and the transferee is a company within the charge to corporation tax, or

(b) the transferor is a company within the charge to corporation tax and the transferee is a person within the charge to income tax.

(2) Section 316 applies only for the purpose of determining—

(a) whether the person within the charge to income tax is entitled to a deduction (or part of a deduction) under section 315, and

(b) the amount of any such deduction.

(3) Accordingly, any reference to—

(a) whether a person is entitled to a deduction (or part of a deduction) under section 315, or

(b) the amount of any such deduction,

is ignored if the person is a company within the charge to corporation tax.

(4) For any entitlement of a company within the charge to corporation tax to a deduction for any of the expenditure, see [F66 sections 255 to 257 of CTA 2009] (corresponding corporation tax provision).

Textual Amendments

F66 Words in s. 318(4) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 628 (with Sch. 2 Pts. 1, 2)

Mineral royalties U.K.

F67 319 Relief in respect of mineral royalties U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F67 S. 319 repealed (with effect in accordance with Sch. 39 para. 43(3) of the amending Act) by Finance Act 2012 (c. 14), Sch. 39 para. 43(1)(b)

Apportionments on sale of land U.K.

320 Nature of item apportioned on sale of estate or interest in land U.K.

(1) This section applies if—

(a) a person sells an estate or interest in land,

(b) on the sale a part of a receipt or outgoing in respect of the estate or interest is apportioned to the seller, and

(c) the receipt or outgoing is receivable or to be paid by the buyer after the apportionment is made.

(2) In calculating the profits of the seller's property business, the part apportioned is treated as being of the same nature as the receipt or outgoing.

Mutual business U.K.

321 Mutual business U.K.

(1) Nothing in this Part is to be read as applying the rules relating to mutual business to property businesses.

(2) Accordingly, receipts and expenses are to be brought into account in calculating the profits of a person's property business even if a relationship of mutuality exists between that person and another.

Chapter 6 U.K. Commercial letting of furnished holiday accommodation

Introduction U.K.

322 Introduction U.K.

(1) This Chapter explains for the purposes of this Part what is meant by the commercial letting of furnished holiday accommodation (see sections 323 to 326).

(2) It matters whether a UK property business consists of or includes the commercial letting of furnished holiday accommodation for the purposes of—

(a) section 312 (deduction for expenditure on energy-saving items: see section 313(3)),

(b) F68 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) F68 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) certain provisions of TCGA 1992 (see section 241 of that Act),

(e) CAA 2001 (see, for example, sections 248 and 249 of that Act),

[F69 (f) section 189(2)(ba) of FA 2004 (meaning of “relevant UK earnings” for pension purposes),

(g) Part 4 of ITA 2007 (loss relief: see section 127 of that Act), and

(h) section 836(3) of ITA 2007 (jointly held property: see exception D).]

[F70 (2A) It matters whether an overseas property business consists of or includes the commercial letting of furnished holiday accommodation in one or more EEA states for the purposes of—

(a) section 312 (deduction for expenditure on energy-saving items: see section 313(3)),

(b) certain provisions of TCGA 1992 (see section 241A of that Act),

(c) CAA 2001 (see, for example, sections 250 and 250A of that Act),

(d) section 189(2)(bb) of FA 2004 (meaning of “relevant UK earnings” for pension purposes),

(e) Part 4 of ITA 2007 (loss relief: see section 127ZA of that Act), and

(f) section 836(3) of ITA 2007 (jointly held property: see exception DA).]

(3) This Chapter also supplements [F71 the provisions mentioned in subsection (2) ] by providing in certain circumstances for the profits of the furnished holiday lettings part of a UK property business to be calculated separately (see sections 327 and 328).

[F72 (4) This Chapter also supplements the provisions mentioned in subsection (2A) by providing in certain circumstances for the profits of the EEA furnished holiday lettings part of an overseas property business to be calculated separately (see sections 328A and 328B).]

Textual Amendments

F68 S. 322(2)(b)(c) repealed (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1031, 1034, Sch. 1 para. 508(a), Sch. 3 Pt. 1 (with transitional provisions and savings in Sch. 2)

F69 S. 322(2)(f)-(h) substituted for s. 322(2)(f) and preceding word (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. {1 para. 508(b)} (with transitional provisions and savings in Sch. 2)

F70 S. 322(2A) inserted (with effect in accordance with Sch. 14 para. 4 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 2(2)(a)

F71 Words in s. 322(3) substituted (with effect in accordance with Sch. 14 para. 4 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 2(2)(b)

F72 S. 322(4) inserted (with effect in accordance with Sch. 14 para. 4 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 2(2)(c)

Definition U.K.

323 Meaning of “commercial letting of furnished holiday accommodation” U.K.

(1) A letting is a lease or other arrangement under which a person is entitled to the use of accommodation.

(2) A letting of accommodation is commercial if the accommodation is let—

(a) on a commercial basis, and

(b) with a view to the realisation of profits.

(3) A letting is of furnished holiday accommodation if—

(a) the person entitled to the use of the accommodation is also entitled, in connection with that use, to the use of furniture, and

(b) the accommodation is qualifying holiday accommodation (see sections 325 and 326).

(4) This section applies for the purposes of this Chapter.

324 Meaning of “relevant period” in sections 325 and 326 U.K.

(1) For the purposes of sections 325 and 326 “the relevant period” for accommodation let by a person in a tax year is determined as follows.

(2) If the accommodation was not let by the person as furnished accommodation in the previous tax year, “the relevant period” is 12 months beginning with the first day in the tax year on which it is let by the person as furnished accommodation.

(3) If the accommodation—

(a) was let by the person as furnished accommodation in the previous tax year, but

(b) is not let by the person as furnished accommodation in the following tax year,

“the relevant period” is 12 months ending with the last day in the tax year on which it is let by the person as furnished accommodation.

(4) Otherwise “the relevant period” is the tax year.

325 Meaning of “qualifying holiday accommodation” U.K.

(1) Accommodation which is let by a person during a tax year is “qualifying holiday accommodation” for the tax year if the availability, letting and pattern of occupation conditions are met.

(2) The availability condition is that, during the relevant period, the accommodation is available for commercial letting as holiday accommodation to the public generally for at least [F73 210 days ] .

(3) The letting condition is that, during the relevant period, the accommodation is commercially let as holiday accommodation to members of the public for at least [F74 105 days ] .

(4) For the purposes of the letting condition, a letting of accommodation for a period of longer-term occupation (see subsection (6)) is not a letting of it as holiday accommodation.

(5) The pattern of occupation condition is that, during the relevant period, not more than 155 days fall during periods of longer-term occupation.

(6) For the purposes of this section a “period of longer-term occupation” is a continuous period of more than 31 days during which the accommodation is in the same occupation otherwise than because of circumstances that are not normal.

Textual Amendments

F73 Words in s. 325(2) substituted (with effect in accordance with Sch. 14 para. 5 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 2(3)(a)

F74 Words in s. 325(3) substituted (with effect in accordance with Sch. 14 para. 5 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 2(3)(b)

326 Under-used holiday accommodation: averaging elections U.K.

(1) This section applies if during a tax year a person lets both—

(a) qualifying holiday accommodation, and

(b) accommodation that would be qualifying holiday accommodation if the letting condition (see section 325(3)) were met in relation to it (“under-used accommodation”).

(2) The person may make an election for the tax year specifying—

(a) the qualifying holiday accommodation, and

(b) any or all of the under-used accommodation.

(3) The under-used accommodation so specified is treated as qualifying holiday accommodation for the tax year if the average of the number of let days for the tax year of all the accommodation specified in the election is at least [F75 105 ] .

(4) “The number of let days” for a tax year of any accommodation is the number of days during the relevant period for which it is commercially let by the person as holiday accommodation to members of the public.

(5) Qualifying holiday accommodation may not be specified in more than one election for a tax year.

(6) An election for a tax year must be made on or before the first anniversary of the normal self-assessment filing date for the tax year.

[F76 (7) This section is to apply separately in relation to accommodation in the United Kingdom and accommodation in EEA states other than the United Kingdom.]

Textual Amendments

F75 Word in s. 326(3) substituted (with effect in accordance with Sch. 14 para. 5 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 2(4)(a)

F76 S. 326(7) inserted (with effect in accordance with Sch. 14 para. 4 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 2(4)(b)

[F77 326A Under-used holiday accommodation: letting condition not met U.K.

(1) This section applies if—

(a) during a tax year a person lets qualifying holiday accommodation,

(b) the accommodation is let by the person—

(i) during the next tax year, or

(ii) during the next two tax years,

(c) the accommodation would (apart from this section) not be qualifying holiday accommodation—

(i) during the tax year mentioned in paragraph (b)(i), or

(ii) during both of the tax years mentioned in paragraph (b)(ii),

only because of a failure to meet the letting condition (see section 325(3)), and

(d) there was a genuine intention to meet the letting condition for the tax year within subsection (1)(c)(i) or each of the tax years within subsection (1)(c)(ii) (as the case may be).

(2) If the person makes an election in respect of that accommodation for any tax year in respect of which the failure mentioned in subsection (1)(c) occurs, the accommodation is to be treated as qualifying holiday accommodation for that tax year.

(3) Subsection (2) does not apply for the purposes of section 326 or subsection (1)(a).

(4) If an election is not made for the first of the tax years within subsection (1)(c)(ii), an election may not be made for the second.

(5) An election for a tax year must be made on or before the first anniversary of the normal self-assessment filing date for the tax year.

(6) References in subsection (1)(a) and (c) to qualifying holiday accommodation include accommodation treated as such under section 326.]

Textual Amendments

F77 S. 326A inserted (with effect in accordance with Sch. 14 para. 6 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 2(5)

Separate profit calculations U.K.

327 [F78 “ relief: UK property business ] U.K.

(1) If a UK property business consists of both—

(a) the commercial letting of furnished holiday accommodation (“the furnished holiday lettings part”), and

(b) other businesses or transactions (“the other part”),

this section requires separate calculations to be made of the profits of the furnished holiday lettings part and the other part.

(2) The calculations must be made if—

(a) section 248 or 249 of CAA 2001 (giving effect to allowances and charges) applies to the furnished holiday lettings part or the other part, or

(b) any provision of [F79 Part 4 of ITA 2007](loss relief) applies in relation to a loss made in either of those parts.[F80 , or

(c) a wear and tear allowance is allowed in relation to the business under section 308C of this Act.]

(3) If there is a letting of accommodation only part of which is holiday accommodation, such apportionments are to be made for the purposes of this section as are just and reasonable.

Textual Amendments

F78 Words in s. 327 heading substituted (with effect in accordance with Sch. 14 para. 4 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 2(6)

F79 Words in s. 327(2)(b) substituted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 509 (with transitional provisions and savings in Sch. 2)

F80 S. 327(2)(c) and word inserted (with effect in accordance with art. 13(1) of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2011 (S.I. 2011/1037), arts. 1, 11(3)

328 Relevant UK earnings for pension [F81 purposes: UK property business ] U.K.

(1) If a UK property business consists of both—

(a) the commercial letting of furnished holiday accommodation (“the furnished holiday lettings part”), and

(b) other businesses or transactions,

this section requires a separate calculation to be made of the profits of the furnished holiday lettings part.

(2) The calculation must be made if the profits of the furnished holiday lettings part are [F82 relevant UK earnings within section 189(2)(ba) of FA 2004.]

(3) If there is a letting of accommodation only part of which is holiday accommodation, such apportionments are to be made for the purposes of this section as are just and reasonable.

Textual Amendments

F81 Words in s. 328 heading substituted (with effect in accordance with Sch. 14 para. 4 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 2(7)

F82 Words in s. 328(2) substituted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 510(2) (with transitional provisions and savings in Sch. 2)

[F83 328A Capital allowances and loss relief: overseas property business U.K.

(1) If an overseas property business consists of both—

(a) the commercial letting of furnished holiday accommodation in one or more EEA states (“the EEA furnished holiday lettings part”), and

(b) other businesses or transactions (“the other part”),

this section requires separate calculations to be made of the profits of the EEA furnished holiday lettings part and the other part.

(2) The calculations must be made if—

(a) section 250 or 250A of CAA 2001 (giving effect to allowances and charges) applies to the EEA furnished holiday lettings part or the other part, or

(b) any provision of Part 4 of ITA 2007 (loss relief) applies in relation to a loss made in either of those parts.

(3) If there is a letting of accommodation only part of which is holiday accommodation, such apportionments are to be made for the purposes of this section as are just and reasonable.

Textual Amendments

F83 Ss. 328A, 328B inserted (with effect in accordance with Sch. 14 para. 4 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 2(8)

328B Relevant UK earnings for pension purposes: overseas property business U.K.

(1) If an overseas property business consists of both—

(a) the commercial letting of furnished holiday accommodation in one or more EEA states (“the EEA furnished holiday lettings part”), and

(b) other businesses or transactions,

this section requires a separate calculation to be made of the profits of the EEA furnished holiday lettings part.

(2) The calculation must be made if the profits of the EEA furnished holiday lettings part are relevant UK earnings within section 189(2)(bb) of FA 2004.

(3) If there is a letting of accommodation only part of which is holiday accommodation, such apportionments are to be made for the purposes of this section as are just and reasonable.]

Textual Amendments

F83 Ss. 328A, 328B inserted (with effect in accordance with Sch. 14 para. 4 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 2(8)

Chapter 7 U.K. Adjustment income

Adjustment on change of basis U.K.

329 Application of Chapter U.K.

(1) This Chapter applies if—

(a) a person carrying on a UK property business changes, from one period of account to the next, the basis on which profits of the business are calculated for income tax purposes,

(b) the old basis accorded with the law or practice applicable in relation to the period of account before the change, and

(c) the new basis accords with the law and practice applicable in relation to the period of account after the change.

(2) The practice applicable in any case means the accepted practice in cases of that description as to how profits of a UK property business should be calculated for income tax purposes.

(3) Subsections (3) to (6) of section 227 (what is meant by a person changing the basis on which profits are calculated) apply for the purposes of this section as they apply for the purposes of that section (but as if any reference to a trade were to a UK property business).

330 Adjustment income and adjustment expense U.K.

(1) An amount by way of adjustment must be calculated in accordance with section 231, which applies in relation to a UK property business as it applies in relation to a trade.

(2) If the amount produced by the calculation is positive, it is treated as income and charged to income tax under this Chapter.

It is referred to in this Chapter as “adjustment income”.

(3) If the amount produced by the calculation is negative, a deduction is allowed for it in calculating the profits of the business.

It is referred to in this Chapter as an “adjustment expense”.

(4) This section is subject to section 234 (no adjustment for certain expenses previously brought into account), which applies in relation to a UK property business as it applies in relation to a trade.

331 Income charged U.K.

Tax is charged under this Chapter on the full amount of any adjustment income arising in the tax year.

332 Person liable U.K.

The person liable for any tax charged under this Chapter is the person receiving or entitled to the adjustment income.

Treatment of adjustment income and adjustment expense U.K.

333 Treatment of adjustment income U.K.

(1) Adjustment income is treated as arising on the last day of the first period of account for which the new basis is adopted.

(2) But if there is a change of basis resulting from a tax adjustment affecting the calculation of any amount brought into account in respect of depreciation, adjustment income is treated as arising only when the asset to which it relates is realised or written off.

(3) Adjustment income is treated for the purposes of [F84 Part 4 of ITA 2007](loss relief) as profits of the UK property business for the tax year in which tax is charged on it.

Textual Amendments

F84 Words in s. 333(3) substituted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 511 (with transitional provisions and savings in Sch. 2)

334 Treatment of adjustment expense U.K.

(1) An adjustment expense is treated as an expense of the business arising on the last day of the first period of account for which the new basis is adopted.

(2) But if there is a change of basis resulting from a tax adjustment affecting the calculation of any amount brought into account in respect of depreciation, an adjustment expense is treated as arising only when the asset to which it relates is realised or written off.

Chapter 8 U.K. Rent receivable in connection with a UK section 12(4) concern

Charge to tax on rent receivable in connection with a UK section 12(4) concern U.K.

335 Charge to tax on rent receivable in connection with a UK section 12(4) concern U.K.

Income tax is charged on rent receivable in connection with a UK section 12(4) concern.

336 Meaning of “rent receivable in connection with a UK section 12(4) concern” U.K.

(1) For the purposes of this Chapter rent is receivable in connection with a UK section 12(4) concern if—

(a) it is receivable in respect of an estate, interest or right in or over land in the United Kingdom, and

(b) the estate, interest or right is used, occupied or enjoyed in connection with a concern listed in section 12(4).

(2) For the purposes of this Chapter rent is also receivable in connection with a UK section 12(4) concern if—

(a) it is receivable in respect of an estate, interest or right in or over land in the United Kingdom,

(b) the lease or other agreement under which it is receivable provides for its recoupment by reducing royalties or payments of a similar nature, and

(c) the reduction applies if the estate, interest or right is used, occupied or enjoyed in connection with a concern listed in section 12(4).

(3) In this Chapter “rent” includes—

(a) a receipt mentioned in section 266(3), and

(b) any other receipt in the nature of rent.

337 Income charged U.K.

(1) Tax is charged under this Chapter on the full amount of the profits arising in the tax year.

(2) This is subject to—

• section 339 (deduction for management expenses of owner of mineral rights), F85 ...

• F85 ...

Textual Amendments

F85 S. 337 entry omitted (with effect in accordance with Sch. 39 para. 43(3) of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 39 para. 43(2)(a)(i)

338 Person liable U.K.

The person liable for any tax charged under this Chapter is the person receiving or entitled to the rent.

Management expenses of owner of mineral rights U.K.

339 Deduction for management expenses of owner of mineral rights U.K.

(1) This section applies if in a tax year—

(a) a person lets a right to work minerals in the United Kingdom, and

(b) the person pays a sum wholly and exclusively as an expense of management or supervision of the minerals in the tax year.

(2) In calculating the amount of rent receivable in connection with a UK section 12(4) concern, a deduction is allowed for the sum for the tax year.

F86 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F86 S. 339(3) omitted (with effect in accordance with Sch. 39 para. 43(3) of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 39 para. 43(2)(a)(ii)

Mineral royalties U.K.

F87 340 Relief in respect of mineral royalties U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F87 Ss. 340-343 repealed (with effect in accordance with Sch. 39 para. 43(3) of the amending Act) by Finance Act 2012 (c. 14), Sch. 39 para. 43(1)(c)

F87 341 Meaning of “mineral lease or agreement” and “mineral royalties” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F87 Ss. 340-343 repealed (with effect in accordance with Sch. 39 para. 43(3) of the amending Act) by Finance Act 2012 (c. 14), Sch. 39 para. 43(1)(c)

F87 342 Extended meaning of “mineral royalties” etc. in Northern Ireland U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F87 Ss. 340-343 repealed (with effect in accordance with Sch. 39 para. 43(3) of the amending Act) by Finance Act 2012 (c. 14), Sch. 39 para. 43(1)(c)

F87 343 Power of [F88 Commissioners] to determine what counts as “mineral royalties” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F87 Ss. 340-343 repealed (with effect in accordance with Sch. 39 para. 43(3) of the amending Act) by Finance Act 2012 (c. 14), Sch. 39 para. 43(1)(c)

F88 Word in s. 343 substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 ss. 50, 53(1), {Sch. 4 para. 132(3)(a)}; S.I. 2005/1126, art. 2(h)

Chapter 9 U.K. Rent receivable for UK electric-line wayleaves

Charge to tax on rent receivable for UK electric-line wayleaves U.K.

344 Charge to tax on rent receivable for a UK electric-line wayleave U.K.

Income tax is charged on rent receivable for a UK electric-line wayleave.

345 Meaning of “rent receivable for a UK electric-line wayleave” U.K.

(1) For the purposes of this Chapter rent is receivable for a UK electric-line wayleave if—

(a) it is receivable in respect of an easement, servitude or right in or over land in the United Kingdom, and

(b) the easement, servitude or right is enjoyed in connection with an electric, telegraph or telephone wire or cable.

(2) The reference to the enjoyment of an easement, servitude or right in connection with an electric, telegraph or telephone wire or cable includes (in particular) its enjoyment in connection with—

(a) a pole or pylon supporting such a wire or cable, or

(b) apparatus used in connection with such a wire or cable.

(3) In this Chapter “rent” includes—

(a) a receipt mentioned in section 266(3), and

(b) any other receipt in the nature of rent.

346 Extent of charge to tax U.K.

(1) Rent receivable for a UK electric-line wayleave is not chargeable to tax under this Chapter for a tax year if—

(a) a person carries on a UK property business in relation to some or all of the land to which the wayleave relates, and

(b) receipts (other than rents receivable for UK electric-line wayleaves) in respect of some or all of that land are brought into account in calculating the profits of the business for the tax year.

(2) In such a case, the rent receivable for the UK electric-line wayleave is brought into account in calculating the profits of the person's UK property business.

(3) The rules for determining whether an amount is chargeable to tax under this Chapter also need to be read with section 22(2) (payments for wayleaves if person carries on a trade).

(4) That subsection secures that an amount which would otherwise be chargeable to tax under this Chapter may be brought into account instead in calculating the profits of a trade.

347 Income charged U.K.

Tax is charged under this Chapter on the full amount of the profits arising in the tax year.

348 Person liable U.K.

The person liable for any tax charged under this Chapter is the person receiving or entitled to the rent.

Chapter 10 U.K. Post-cessation receipts

Charge to tax on post-cessation receipts U.K.

349 Charge to tax on post-cessation receipts U.K.

Income tax is charged on post-cessation receipts arising from a UK property business.

350 Extent of charge to tax U.K.

(1) A post-cessation receipt is chargeable to tax under this Chapter only so far as the receipt is not otherwise chargeable to income or corporation tax.

(2) Accordingly, a post-cessation receipt arising from a UK property business is not chargeable to tax under this Chapter so far as it is brought into account in calculating the profits of the business for any period.

351 Income charged U.K.

(1) Tax is charged under this Chapter on the full amount of the receipts received in the tax year.

(2) This is subject to—

(a) sections 254 and 255 (allowable deductions), and

(b) section 257 (election to carry back),

which apply for the purposes of this Chapter as they apply for the purposes of Chapter 18 of Part 2 (but as if any reference to a trade were to a UK property business).

352 Person liable U.K.

The person liable for any tax charged under this Chapter is the person receiving or entitled to the receipts.

Meaning of “post-cessation receipts” U.K.

353 Basic meaning of “post-cessation receipt” U.K.

(1) In this Chapter “post-cessation receipt” means a sum—

(a) which is received after a person permanently ceases to carry on a UK property business, and

(b) which arises from the carrying on of the business before the cessation.

(2) Subsection (3) applies if—

(a) a firm carries on a UK property business,

(b) a person ceases to be a partner in the firm, and

(c) at least one of the persons with whom the partner carried on the business before ceasing to be a partner continues to carry it on afterwards.

(3) The partner is treated for the purposes of this Chapter as permanently ceasing to carry on the business.

Modifications etc. (not altering text)

C7 Ss. 353-368 modified (7.4.2005) by Finance Act 2005 (c. 7), s. 51(2)

354 Other rules about what counts as a “post-cessation receipt” U.K.

(1) Section 355 (transfer of rights if transferee does not carry on UK property business) treats certain amounts as being, or not being, post-cessation receipts for the purposes of this Chapter.

(2) The following provisions (which treat certain amounts as post-cessation receipts) apply for the purposes of this Chapter as they apply for the purposes of Chapter 18 of Part 2 (but as if any reference to a trade were to a UK property business)—

• section 82(6) (contributions to local enterprise organisations or urban regeneration companies),

• section 104(3) (distribution of assets of mutual concerns),

• section 109(2) (receipt by donor or connected person of benefit attributable to certain gifts),

• section 248 (debts paid after cessation) [F89 (reading the reference in subsection (3) to section 96 of ITA 2007 as a reference to section 125 of that Act)] ,

• section 249 (debts released after cessation), as qualified, where appropriate, by section 48(4) (car F90 ... hire), and

• section 250 (receipts relating to post-cessation expenditure) [F91 (reading the reference in subsection (1) to section 96 of ITA 2007 as a reference to section 125 of that Act)] .

(3) This Chapter also needs to be read with—

(a) section 310(3) (which treats certain amounts as not being post-cessation receipts), and

(b) section 844 (which treats certain income as a post-cessation receipt: unremittable income).

Textual Amendments

F89 Words in s. 354(2) inserted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 512(a) (with transitional provisions and savings in Sch. 2)

F90 Words in s. 354(2) omitted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 43

F91 Words in s. 354(2) inserted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 512(b) (with transitional provisions and savings in Sch. 2)

Modifications etc. (not altering text)

C8 Ss. 353-368 modified (7.4.2005) by Finance Act 2005 (c. 7), s. 51(2)

355 Transfer of rights if transferee does not carry on UK property business U.K.

(1) This section applies if—

(a) a person (“the transferor”) permanently ceases to carry on a UK property business,

(b) the transferor transfers to another person (“the transferee”) for value the right to receive sums arising from the carrying on of any business (“the transferred business”) comprised in the transferor's UK property business, and

(c) the transferee does not subsequently carry on the transferred business.

(2) The transferor is treated as receiving a post-cessation receipt.

(3) The amount of the receipt is—

(a) the amount or value of the consideration for the transfer, if the transfer is at arm's length, or

(b) the value of the rights transferred as between parties at arm's length, if the transfer is not at arm's length.

(4) Any sums mentioned in subsection (1)(b) which are received after the cessation of the property business are not post-cessation receipts.

Modifications etc. (not altering text)

C9 Ss. 353-368 modified (7.4.2005) by Finance Act 2005 (c. 7), s. 51(2)

Supplementary U.K.

356 Application to [F92 businesses within the charge to corporation tax] U.K.

(1) In this Chapter (except in section 355) any reference to a UK property business includes [F93 one within the charge to corporation tax] .

(2) In this Chapter (except in section 355) any reference to a person permanently ceasing to carry on a UK property business [F94 includes, in the case of a company, the occurrence of an event treated under section 289 of CTA 2009 (company starting or ceasing to be within the charge to corporation tax) as the company permanently ceasing to carry on the business.]

(3) In applying any provision of Chapter 18 of Part 2 for the purposes of this Chapter references to the calculation of the profits of a trade for corporation tax purposes are to be read as references to the calculation of the profits of a [F95 UK property business] for corporation tax purposes.

Textual Amendments

F92 Words in s. 356 title substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 629(5) (with Sch. 2 Pts. 1, 2)

F93 Words in s. 356(1) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 629(2) (with Sch. 2 Pts. 1, 2)

F94 Words in s. 356(2) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 629(3) (with Sch. 2 Pts. 1, 2)

F95 Words in s. 356(3) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 629(4) (with Sch. 2 Pts. 1, 2)

Modifications etc. (not altering text)

C10 Ss. 353-368 modified (7.4.2005) by Finance Act 2005 (c. 7), s. 51(2)

F96 Chapter 11 U.K. Overseas property income

Textual Amendments

F96 Pt. 3 Ch. 11 omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 49

F96 357 Charge to tax on overseas property income U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F96 358 Meaning of “overseas property income” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F96 359 Income charged U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F96 360 Person liable U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 12 U.K. Supplementary

361 Changes in trustees and personal representatives U.K.

(1) This section applies if there is a change—

(a) in the trustees of a trust, or

(b) in the personal representatives of a person,

at a time when they are carrying on a property business.

(2) For income tax purposes, the change does not result in—

(a) any of the trustees or personal representatives before the change permanently ceasing to carry on the business, or

(b) any of the trustees or personal representatives after the change starting to carry on the business.

Modifications etc. (not altering text)

C11 Ss. 353-368 modified (7.4.2005) by Finance Act 2005 (c. 7), s. 51(2)

362 Effect of company starting or ceasing to be within charge to income tax U.K.

(1) This section applies if a company starts or ceases to be within the charge to income tax under Chapter 3 of this Part in respect of a UK property business.

(2) The company is treated for the purposes of this Part—

(a) as starting to carry on the business when it starts to be within the charge, or

(b) as permanently ceasing to carry on the business when it ceases to be within the charge.

Modifications etc. (not altering text)

C12 Ss. 353-368 modified (7.4.2005) by Finance Act 2005 (c. 7), s. 51(2)

363 Overseas property businesses and overseas land: adaptation of rules U.K.

(1) This section applies if a provision of this Part—

(a) applies to an overseas property business or land outside the United Kingdom, but

(b) is expressed by reference to a domestic concept of law.

(2) In relation to that business or land, the provision is to be read so as to produce the result most closely corresponding with that produced by the provision in relation to a UK property business or land in the United Kingdom.

Modifications etc. (not altering text)

C13 Ss. 353-368 modified (7.4.2005) by Finance Act 2005 (c. 7), s. 51(2)

364 Meaning of “lease” and “premises” U.K.

(1) In this Part “lease” includes—

(a) an agreement for a lease (so far as the context permits), and

(b) any tenancy,

but does not include a mortgage.

(2) In this Part “premises” includes land.

Modifications etc. (not altering text)

C14 Ss. 353-368 modified (7.4.2005) by Finance Act 2005 (c. 7), s. 51(2)