Part 3Property income

Chapter 4Profits of property businesses: lease premiums etc.

Amounts treated as receipts: leases

C1277Lease premiums

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—

P×(50-Y50)math

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.