Part 3Property income
Chapter 4Profits of property businesses: lease premiums etc.
Amounts treated as receipts: leases
C1281Sums payable for variation or waiver of F1terms of lease
1
This section applies if—
a
a sum becomes payable by the tenant (otherwise than by way of rent) as consideration for the variation or waiver of a term of a lease,
b
the sum is due to the landlord or a person who is connected with the landlord, and
c
the period for which the variation or waiver has effect is 50 years or less.
2
The person to whom the sum 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 contract providing for the variation or waiver is entered into.
4
The amount of the receipt is given by the formula—
where—
S is the sum payable as consideration for the variation or waiver, and
Y is the number of complete periods of 12 months (other than the first) comprised in the period for which the variation or waiver has effect.
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.
6
In determining for the purposes of this Chapter the duration of the period for which the variation or waiver has effect, any part of the period that falls after the expiry of the effective duration of the lease is excluded.