Section 64: Restrictions on section 61 expenses: lease premium receipts
263.This section is based on section 87(5) of ICTA. It restricts the expenses a tenant is treated as incurring under section 61 where a tenant under a taxed lease:
grants a sublease in respect of a property which section 63 treats the tenant as occupying for the purposes of the trade; and
receives in respect of the sublease, an amount which is brought into account as a receipt under Chapter 4 of Part 3 of this Act (a “lease premium receipt”).
264.Section 87(5) of ICTA applies where there is a reduction in a receipt of a Schedule A business by virtue of section 34 or 35 of ICTA. This section also applies where there is a reduction in a receipt of an overseas property business by virtue of section 34 or 35 of ICTA as applied by section 65A(5) of ICTA. See Change 13 in Annex 1.
265.Section 61 treats a tenant who occupies land under a taxed lease for the purposes of a trade as incurring an expense for each qualifying day in the receipt period of the taxed receipt relating to the taxed lease. The expense is calculated by reference to the amount of the taxed receipt.
266.If there is a reduction under section 288 in the amount which the tenant brings into account as a receipt under Chapter 4 of Part 3 of this Act in respect of the sublease, section 64 makes a corresponding reduction in the amount of the expense which section 61 treats the tenant as incurring for a qualifying day in the receipt period of the lease premium receipt.
267.It is not clear how the rule in section 37(5) of ICTA (as applied to section 87(4) of ICTA by section 87(5)) of ICTA is intended to apply where there is more than one “amount chargeable” by reference to which relief can be claimed for the same qualifying day.
268.Subsections (3) and (4) treat the tenant as incurring an expense for a qualifying day of the amount by which the “daily amount” of the taxed receipt exceeds:
the “daily reduction” of the lease premium receipt; or
if the qualifying day falls within the receipt period of more than one lease premium receipt, the total of the daily reductions of those lease premium receipts.
269.This corresponds to the treatment in section 293 of this Act of an expense under section 292 for a qualifying day which falls within the receipt period of more than one lease premium receipt. See Change 15 in Annex 1.
270.The “daily amount” of a taxed receipt and the “daily reduction” of a lease premium receipt are calculated according to the formulas in subsection (6):
the formula for calculating the daily amount of the taxed receipt is the same formula used in section 61(4) to calculate the amount of the expense which the tenant is treated as incurring for each qualifying day in the receipt period of the taxed receipt; and
the formula for the daily reduction of the lease premium receipt allocates equal amounts of the reduction by reference to the taxed receipt under section 288 to each day in the receipt period of the lease premium receipt.
