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- Point in Time (06/04/2006)
- Original (As enacted)
Version Superseded: 01/04/2009
Point in time view as at 06/04/2006.
There are currently no known outstanding effects for the Income Tax (Trading and Other Income) Act 2005, Cross Heading: Tenants under taxed leases.
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(1)Sections 61 to 67 apply if land used in connection with a trade is subject to a taxed lease.
(2)Section 61 (tenants occupying land for purposes of trade treated as incurring expenses) applies in calculating the profits of a trade carried on by the tenant under the taxed lease for the purpose of making deductions for the expenses of the trade.
(3)But any deduction for an expense under section 61 is subject to the application of any provision of Chapter 4 of this Part.
(4)In this section and sections 61 to 67 the following expressions have the same meaning as in Chapter 4 of Part 3 (profits of property businesses: lease premiums etc.)—
“receipt period” (see section 288(6)),
“taxed lease” (see section 287(4)),
“taxed receipt” (see section 287(4)), and
“unreduced amount” (see section 290(2)).
(5)Section 290(3) and (4) (unreduced amount of taxed receipt under section 277 as a result of section 278) applies for the purposes of sections 61 to 65.
(6)In sections 64 to 67 references to a reduction under section 288 by reference to a taxed receipt have the same meaning as in Chapter 4 of Part 3 (see section 290(6)).
(7)In the application of sections 64 to 67 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.
(1)The tenant under the taxed lease is treated as incurring an expense of a revenue nature in respect of the land 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 is a day—
(a)that falls within the receipt period of the taxed receipt, and
(b)on which the tenant occupies the whole or part of the land subject to the taxed lease for the purposes of carrying on a trade.
(4)If on the qualifying day the tenant occupies the whole of the land subject to the taxed lease for the purposes of the trade, the amount of the expense for the qualifying day by reference to the taxed receipt is given by the formula—
A is the unreduced amount of the taxed receipt, and TRP is the number of days in the receipt period of the taxed receipt.
(5)If on the qualifying day the tenant occupies part of the land subject to the taxed lease for the purposes of the trade, the amount of the expense for the qualifying day by reference to the taxed receipt is given by the formula—
where—
F is the fraction of the land that is so occupied calculated on a just and reasonable basis, and
A and TRP have the same meaning as in subsection (4).
(6)This section is subject to section 62 (limit on deductions if tenant entitled to mineral extraction allowance).
(1)This section applies if the tenant under the taxed lease has become entitled, in respect of expenditure on the acquisition of an interest in the land subject to the taxed lease, to an allowance for a tax year under Part 5 of CAA 2001 (mineral extraction allowances) in respect of expenditure falling within section 403 of that Act (qualifying expenditure on acquiring a mineral asset).
(2)If the allowance is in respect of the whole of the expenditure, no deduction is allowed for expenses under section 61 for a qualifying day falling within that or a later tax year.
(3)If the allowance is in respect of only part of the expenditure (“the allowable part”) the amount of the deduction for expenses under section 61 for a qualifying day falling within that or a later tax year is calculated by multiplying the amount that, apart from this section, would be the amount of the deduction for the qualifying day by—
where—
WE is the whole of the expenditure, and
AP is the allowable part of the expenditure.
(1)This section applies if the tenant under the taxed lease—
(a)does not occupy the land subject to the taxed lease, or a part of it, but
(b)deals with the tenant's interest in the land, or the part of it, as property employed for the purposes of carrying on a trade.
(2)Section 61 applies as if the land or the part of it were occupied by the tenant for the purposes of the trade.
(3)But the tenant is not treated as incurring an expense in respect of the land for a qualifying day as a result of this section so far as the tenant is treated as incurring an expense under section 292 (tenants under taxed leases treated as incurring expenses) in respect of the land for the day in calculating the profits of the tenant's property business.
(4)This section is subject to sections 64 and 65 (restrictions on section 61 expenses where the additional calculation rule is relevant).
(1)This section applies if—
(a)a lease has been granted out of the taxed lease, and
(b)in calculating the amount of a receipt of a property business under Chapter 4 of Part 3 (profits of property businesses: lease premiums etc.) in respect of the lease, there is a reduction under section 288 (the additional calculation rule) by reference to the taxed receipt.
In this section and sections 65 and 67 such a receipt is referred to as a “
”.(2)Subsections (3) to (5) provide for the application of section 61 as a result of section 63 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 61 as a result of section 63 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 that expense for the qualifying day by reference to the taxed receipt is equal to that excess.
(5)If the qualifying day falls within the receipt period 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, and
TRP is the number of days in the receipt period of the taxed receipt, and
the “daily reduction” of a lease premium receipt is given by the formula—
where—
AR is the reduction under section 288 by reference to the taxed receipt, and
RRP is the number of days in the receipt period of the lease premium receipt.
(7)Section 65 explains how this section operates if the lease does not extend to the whole of the premises subject to the taxed lease.
(1)This section applies if—
(a)the conditions in section 64(1)(a) and (b) are met, and
(b)the lease granted out of the taxed lease does not extend to the whole of the premises subject to the taxed lease.
(2)Subsections (3) to (5) apply for a qualifying day that falls within the receipt period of the lease premium receipt.
(3)Sections 61, 63 and 64 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 61, 63 and 64 apply separately in relation to each part of the premises subject to a lease to which such a lease premium receipt relates and to the remainder of the premises.
(5)Where sections 61, 63 and 64 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.
Section 296 (corporation tax receipts treated as taxed receipts) applies for the purposes of sections 60 to 67.
(1)This section provides for the application of section 61 as a result of section 63 if—
(a)a lease has been granted out of the taxed lease,
(b)in calculating the amount of a corporation tax receipt in respect of the lease, 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
(c)the amount chargeable on the superior interest is the taxed receipt for the purposes of section 61.
(2)Sections 61 and 63 to 65 apply as follows—
(a)the corporation tax receipt is treated as if it were a lease premium receipt for the purposes of sections 64 and 65,
(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.
(3)There is a corporation tax receipt in respect of a lease if—
(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) in respect of the lease for an accounting period ending after 5th April 2005, or
(b)there would be such a receipt, but for the operation of section 37(2) or (3) of ICTA (reductions in certain receipts under section 34 or 35 of ICTA).
(4)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 corporation tax 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.
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