Income and Corporation Taxes Act 1988

34 [F2 Treatment of premiums, etc. as rent.] U.K.

(1) M1 Where the payment of any premium is required under a lease, or otherwise under the terms subject to which a lease is granted, and the duration of the lease does not exceed 50 years, the landlord shall be treated for [F3 corporation tax purposes] as [F4 receiving when the lease is granted] an amount by way of rent (in addition to any actual rent) equal to—

where P is the premium and Y is the number of complete periods of 12 months (other than the first) comprised in the duration of the lease.

(2) Where the terms subject to which a lease is granted impose on the tenant an obligation to carry out any work on the premises, the lease shall be deemed for the purposes of this section to have required the payment of a premium to the landlord (in addition to any other premium) of an amount equal to the amount by which the value of the landlord’s estate or interest immediately after the commencement of the lease exceeds what its then value would have been if those terms did not impose that obligation on the tenant.

(3) M2 Subsection (2) above shall not apply in so far as the obligation requires the carrying out of work the payment for which would, if the landlord and not the tenant were obliged to carry it out, be deductible [F5 as an expense of any Schedule A business carried on by the landlord].

(4) M3 Where, under the terms subject to which a lease is granted, a sum becomes payable by the tenant in lieu of the whole or a part of the rent for any period, or as consideration for the surrender of the lease, the lease shall be deemed for the purposes of this section to have required the payment of a premium to the landlord (in addition to any other premium) of the amount of that sum; but—

(a) [F6 in computing the profits of the Schedule A business of which the sum payable in lieu of rent is by virtue of this subsection to be treated as a receipt], the duration of the lease shall be treated as not including any period other than that in relation to which the sum is payable; and

(b) notwithstanding anything in subsection (1) above, rent treated as arising by virtue of this subsection shall be [F7 deemed to be received] when the sum in question becomes payable by the tenant.

(5) Where, as consideration for the variation or waiver of any of the terms of a lease, a sum becomes payable by the tenant otherwise than by way of rent, the lease shall be deemed for the purposes of this section to have required the payment of a premium to the landlord (in addition to any other premium) of the amount of that sum; but—

(a) in computing [F8 the profits of the Schedule A business of which that sum is by virtue of this subsection to be treated as a receipt], the duration of the lease shall be treated as not including any period which precedes the time at which the variation or waiver takes effect, or falls after the time at which it ceases to have effect; and

(b) notwithstanding anything in subsection (1) above, rent treated as arising by virtue of this subsection shall be [F9 deemed to be received] when the contract providing for the variation or waiver is entered into.

(6) M4 Where a payment falling within subsection (1), (4) or (5) above is due to a person other than the landlord, [F10 no amount shall fall under that subsection to be treated as a receipt of any Schedule A business carried on by the landlord; but [F11 if that other person is a company, the company] shall be taken to have received as income an amount equal to the amount which would otherwise fall to be treated as rent and to be chargeable to [F12 corporation tax] as if [F13 the company] had received it in consequence of having, on [F14 its] own account, entered into a transaction falling to be treated as mentioned in paragraph 1(2) of Schedule A.].

(7) Subsection (6) above shall not apply in relation to any payment falling within subsection (5) above unless it is due to a person who is, within the meaning of section 839, connected with the landlord.

[F15 (7A) An amount treated under this section as rent shall be taken into account in computing the profits of the Schedule A business in question for the [F16 accounting] period in which it is treated as received.]

(8) M5 Where an amount by reference to which a [F17 company] is chargeable to [F18 corporation tax] by virtue of this section is payable by instalments (“the [F18 corporation tax] instalments”), the [F18 corporation tax] chargeable by reference to that amount [F19 may, at [F20 the company's] option, be paid] by such instalments as the Board may allow over a period not exceeding eight years and ending not later than the time at which the last of the [F18 corporation tax] instalments is payable.

(9) F21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F2 S. 34 sidenote substituted (with effect as mentioned in s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(1), Sch. 5 para. 15(2), (with Sch. 5 para. 73)

F3 Words in s. 34 (1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 17(2) (with Sch. 2)

F4 Words in s. 34(1) substituted (with effect as mentioned in s. 40(5) of the amending Act) by Finance Act 1998 (c. 36), s. 40(2)

F5 Words in s. 34(3) substituted (with effect as mentioned in s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(1), Sch. 5 para. 15(3), (with Sch. 5 para. 73)

F6 Words in s. 34(4)(a) substituted (with effect as mentioned in s. 40(5) of the amending Act) by Finance Act 1998 (c. 36), s. 40(3)(a)

F7 Words in s. 34(4)(b) substituted (with effect as mentioned in s. 40(5) of the amending Act) by Finance Act 1998 (c. 36), s. 40(3)(b)

F8 Words in s. 34(5)(a) substituted (with effect as mentioned in s. 40(5) of the amending Act) by Finance Act 1998 (c. 36), s. 40(4)(a)

F9 Words in s. 34(5)(b) substituted (with effect as mentioned in s. 40(5) of the amending Act) by Finance Act 1998 (c. 36), s. 40(4)(b)

F10 Words in s. 34(6) substituted (with effect as mentioned in s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(1), Sch. 5 para. 15(4), (with Sch. 5 para. 73)

F11 Words in s. 34(6) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 17(3)(a) (with Sch. 2)

F12 Words in s. 34(6) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 17(3)(b) (with Sch. 2)

F13 Words in s. 34(6) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 17(3)(c) (with Sch. 2)

F14 Word in s. 34(6) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 17(3)(d) (with Sch. 2)

F15 S. 34(7A) inserted (with effect as mentioned in s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(1), Sch. 5 para. 15(5), (with Sch. 5 para. 73)

F16 Word in s. 34(7A) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 17(4) (with Sch. 2)

F17 Word in s. 34(8) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 17(5)(a) (with Sch. 2)

F18 Words in s. 34(8) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 17(5)(b) (with Sch. 2)

F19 Words in s. 34(8) substituted (with effect as mentioned in s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(1), Sch. 5 para. 15(6), (with Sch. 5 para. 73)

F20 Words in s. 34(8) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 17(5)(c) (with Sch. 2)

F21 S. 34(9) repealed (with effect in accordance with s. 39(4)(5) of the repealing Act) by Finance Act 1995 (c. 4), s. 162, Sch. 29 Pt. 08(01), Note

Modifications etc. (not altering text)

C1 S. 34 modified (with effect in accordance with s. 39(4)(5) of the modifying Act) by Finance Act 1995 (c. 4), s. 39(3), Sch. 6 para. 9

C2 See 1976(D) s.34and Sch.6 para.4. 1976(D)repealed by 1985 ss.93, 98(6)and Sch.27 Part. Xwith effect from 19March 1985.

C3 See 1979(C) s.106and Sch.3 paras.5and 7—exclusion of amounts taxed under this section in computing capital gains.

Marginal Citations

M1 SOURCE-1970 s. 80(1), (2)

M2 SOURCE-1970 s. 80(2); 1987 Sch. 15 para. 13

M3 SOURCE-1970 s. 80(3), (4)

M4 SOURCE-1970 s. 80(5)

M5 SOURCE-1970 s. 80(6), (7); 1972 s. 81(1)