Part 3Property income
Chapter 4Profits of property businesses: lease premiums etc.
Amounts treated as receipts: leases
277Lease 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—
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.